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Why Do Builders Need a Third Party Insurance-Backed Warranty in New Jersey?


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Explaining New Jersey’s Structural Warranty Requirements for New Construction

In New Jersey, builders are required to have an insurance-backed warranty from a third party provider when they build a new home. Why does this requirement exist, what do warranties cover and how can builders fulfill this requirement? Keep reading to learn everything you need to know.

Understanding why New Jersey requires structural warranties on new home builds

10-year insurance-backed structural warranties are the result of Congressional hearings that happened in 1973. The hearings investigated poor residential construction practices along with the absence of builder warranties that forced builders to stand behind the quality of their work. Ten years later, the Department of Housing and Urban Development (HUD) enacted standards for insurance-backed warranties that were mandatory for new homes purchased using mortgage insurance from the Federal Housing Administration (FHA).

Some states also choose to make this protection a requirement for all new residential construction, and New Jersey is one of those states.

What do structural warranties cover?

A structural warranty covers 1 year of workmanship defects, 2 years of systems defects, and 10 years of structural defects.

Structural warranties cover very specific types of structural defects that result in physical damage to load-bearing elements of a home, which in turn result in failure of the home’s load-bearing function to the extent that a home becomes unsafe, unsanitary or otherwise unlivable. The language is clear and specific, ensuring every party understands their exact obligations and responsibilities.

Typical load bearing elements that are covered under a warranty include:

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

How builders can meet New Jersey’s structural warranty requirement

Fulfilling your obligations under New Jersey’s statutes is simple and you’ll have a number of options when choosing which company to partner with. Of course, you first want to confirm that the company is approved by the New Jersey Department of Community Affairs (DCA) Commissioner as an authorized new home warranty provider. It’s also important to vet all potential companies on things like:

  • Financial strength, including the value of claims paid out and the reputation of the reinsurance company that backs the warranty.
  • Helpfulness of the customer service team, including the number of field reps in your area. Will you be able to call with questions or email a customer support team and expect a speedy response?
  • Risk management, including adherence to best practices and strict quality controls. The company should require a geotechnical and soils report on high-value homes, for example. Other good signs include engineers on staff and final inspections to confirm workmanship.

Structural Warranties can protect builders and their buyers from devastating structural problems. But, maybe even more importantly, they give homeowners that all-too-important peace of mind that when something goes wrong, they’re covered. Become a member today!