fbpx

What Does a Home Builders Warranty Cover on New Construction?

What Does a Home Builders Warranty Cover on New Construction?

What does a home builders warranty cover on new construction?

A home builders warranty covers qualifying workmanship defects, distribution systems defects and structural defects to designated load-bearing components. But what does that mean, and why does it matter to you as a builder? Knowing what a home builders warranty covers and how it affects you can help you make important decisions about your building future.

What does it cover, exactly?

Generally, a home builders warranty, also known as a structural warranty, covers workmanship defects, distribution systems defects and structural defects to load-bearing elements.

The workmanship component establishes the standards applicable to the fit, finish and materials used in the construction of a home. Commonly used across industries, fit refers to how well the parts of the finished product come together, and finish refers to the completeness of work.

The distribution systems aspect of the warranty establishes the standards for a home’s electrical, plumbing and mechanical systems.

The structural warranty addresses the designated load-bearing elements of a home. A load-bearing element includes any of the 9 following elements:

  • Beams
  • Girders
  • Lintels
  • Masonry
  • Footings
  • Columns
  • Load-bearing walls and partitions
  • Roof-framing systems
  • Floor systems

Essentially, a load-bearing element is anything that keeps the house standing. The structural component within a home builders warranty can cover these elements from defects and damage that make the home unsafe, unsanitary or unlivable. Coverage lengths vary by state and provider. As the leading provider of home builders warranties in the US, 2-10 Home Buyers Warranty (2-10 HBW) typically covers structural defects for 10 years from the day of closing.

Why would a builder want one?

By law, builders are responsible for guaranteeing that they will address any structural issues that occur in any of their builds. If something goes wrong structurally, the builder is responsible for paying to address it. The cost to address a structural defect ranges from $42,000 to $113,000 per claim. A home builders warranty lets you transfer that financial responsibility to someone else.

Additionally, it provides clearly defined construction standards for workmanship and distribution systems. With 2-10 HBW, coverage for workmanship defects spans for 1 year from the day of closing. Coverage for defects to distribution systems spans for 2 years from the day of closing. Having these clearly defined standards eliminates confusion, reduces noise and saves builders money and hassle by explicitly setting expectations around what’s covered.

How much does a home builders warranty cost?

The cost of a home builders warranty varies by provider. A 2-10 HBW home builders warranty typically costs less than 0.5% of the purchase price of the home, including land. Generally, this ranges between $500 and $1,000, depending on the cost of the home, its location and other factors, on average. Of course, you can always take the guesswork out with a free quote from 2-10 HBW.

Regardless, it’s often a fraction of the cost to address structural issues yourself. This cost also protects your homeowners from having to pay for structural damages, in turn protecting your reputation. It also lets you project your future more accurately because you have a contingency plan. Rather than having to scramble to find the funds to pay for legally mandated repairs, you can let 2-10 HBW handle the costs for you.

I’ve never had a structural claim against me. Why would I need a home builders warranty?

Many times, structural defects occur because of something outside your control. In fact, 80% of structural claims are caused by soil movement around the home’s foundation. And many structural defects don’t show until years after you sell the house. Just because you haven’t had a structural claim against you yet doesn’t mean you won’t ever. Plus, it doesn’t take a catastrophe to cost you money. Even if you’re just dealing with a meticulous homeowner, each claim call you take can cost money.

Say you build a neighborhood of tract houses. You’ve never had a structural claim against you because you follow all local building codes and hire only the best subcontractors. Three years later, you start getting calls from homeowners complaining that their foundations are damaged. In total, 30 of the homes you built, all within the same community, file a structural claim.

With a home builders warranty, the warranty insurer pays for the costs to repair the damage, not you. Without one, you would have to pay the costs to repair the damage by yourself. In this case, using average claim costs, without a home builders warranty, you’d have to pay between over $1.2 million and over $3.3 million to address these problems. However, with a warranty from 2-10 HBW, you could transfer both the financial responsibility and the duty to field those claim calls away from your business and onto ours, saving you time and money.

What is not covered with a home builders warranty?

Different providers provide different coverage. But generally, it will not cover the following:

  • Household appliances. If an oven or refrigerator broke down from routine use, a home builders warranty likely would not cover it.
  • Structural damage caused by natural disasters. If a tornado, flood or hurricane caused structural damage, homeowners insurance may cover the damage. But a home builders warranty would not.
  • Certain detached structures. If the detached structure (e.g., a garage) was part of the home’s original construction, a home builders warranty may cover it. However, if you were to add a detached structure after completing the original construction (e.g., a new garage), that new structure may not be considered part of the original coverage.

You should always carefully review coverage exclusions and limitations. At 2-10 HBW, we show you our exclusions and limitations upfront and transparently.

Is a home builders warranty worth buying?

Yes.

A home builders warranty from 2-10 HBW does 3 things for you as a builder.

  1. Protects your profit. We take on the financial responsibility for structural defects so you don’t have to.
  2. Promotes your quality. A home builders warranty provides third-party validation of the quality of your work. It also gives buyers peace of mind that if something goes wrong, they have a solution. In fact, 94% of prospective buyers are more likely to purchase a home from a builder that offers a structural warranty.
  3. Lets you plan for your future. A home builders warranty lets you move onto your next build without having to worry about Statutes of Repose. It minimizes your risk exposure because if something goes wrong structurally, the warranty insurer, not you, is responsible for addressing it. And it keeps your liability from compounding as you build more homes.

It’s worth buying to protect yourself from ongoing liabilities related to structural damages.

Get a free quote on home builder warranty coverage from 2-10 HBW.

Learn how you can protect your business and add valuable selling points to your new builds with a 2-10 HBW structural warranty.

You Build it, We'll back you up.

Learn why 1 in 5 new homes nationwide are covered by a 2-10 HBW Structural Warranty.