Should I Have a Home Warranty on New Construction?
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Newly constructed homes usually come with the benefit of being lower-maintenance—at least for the first year. A new construction home also receives a builder’s warranty that covers materials and workmanship for five to 10 years. Between that and homeowners insurance, you may decide that even the best home warranty is an unnecessary investment.
You might find, however, that certain home warranty aspects such as appliance coverage could benefit you. If your brand-new appliances break down after their manufacturer’s warranties—which typically only last one year—have expired, having a home warranty can protect you from costly repairs. We’ll explore the benefits and drawbacks of a home warranty for new construction to help you decide whether a policy is right for you.
What Is a Home Warranty?
A home warranty covers repair and replacement costs for your home’s major systems and appliances like the refrigerator, air conditioner, and electrical system. While homeowners insurance covers damage caused by events such as robberies and natural disasters, a home warranty covers system and appliance breakdowns due to normal wear and tear. Although most mortgage lenders require home insurance, home warranties are optional.
When shopping for a home warranty, there are two costs to consider: the premium and the service call fee. Most home warranty companies allow you to pay your premium on either a monthly or an annual basis. Often, you can snag a discount by paying your premium for the entire year upfront. The service call fee, meanwhile, is similar to an insurance deductible. You must pay a flat fee each time you file a claim and a service technician visits your home.
Home warranties typically last for one year, though some companies offer multiyear contracts. You can purchase a home warranty at any time and renew it each year for continuous coverage.
- Each home warranty company partners with a network of qualified professionals including plumbers, electricians, HVAC specialists, and other home service technicians. When you file a claim, the home warranty company will schedule a service appointment on your behalf. Depending on the situation and company, you may also be able to hire your own technician.
The technician will visit your home, diagnose the problem with your system or appliance, and submit a report to the warranty company. If the problem falls under the terms of your contract, the technician will complete the necessary repair or replacement. You’ll pay your service call fee directly to the technician and the home warranty provider will cover all remaining costs.
Home Warranties vs. Builder’s Warranties
A builder’s warranty is coverage provided by the homebuilder. Rather than being a separate cost, it’s wrapped into the home purchase price. Homebuilder warranties cover materials, workmanship, and structural elements for the first few years after a home’s construction.
The warranty period for materials and workmanship is typically one year while coverage for HVAC, electrical, and plumbing systems lasts for two. The structural warranty may last up to 10 years and covers major defects that make the home unsafe.
On the other hand, a home warranty is purchased directly from a warranty company by the homeowner. Home warranties are annual plans that can be purchased at any time and renewed indefinitely. They cover system and appliance breakdowns caused by normal wear and tear.
You may notice some overlap if you compare your builder’s warranty with a sample home warranty contract. Both policies could cover major home systems such as electrical and plumbing. However, unlike a builder’s warranty, many home warranty plans also cover your home’s appliances. They may also provide benefits such as discounts on routine maintenance and the ability to choose your own technicians.
Should You Get a Home Warranty for New Construction?
When purchasing a newly constructed home, homebuyers will likely get three types of coverage: a builder’s warranty, homeowners insurance, and manufacturer’s warranties for individual items.
These policies leave gaps in coverage—particularly when it comes to your appliances. Here’s a quick rundown:
- Builder’s warranty: The builder’s warranty on your new construction home applies to the permanent parts of the house’s structure and is unlikely to include appliance coverage.
- Manufacturer’s warranties: Each brand-new appliance will have a manufacturer warranty. However, these policies rarely last longer than a year and only cover manufacturing defects.
- Homeowners insurance: Many appliance breakdowns occur due to normal wear and tear, which homeowners insurance doesn’t cover. These policies only protect appliances damaged by a singular covered event such as vandalism or a fire.
A new construction home warranty can offer protection from costly appliance repairs that other policies won’t cover. Even brand-new appliances eventually break down. When they do, a home warranty makes it possible to repair or replace them at minimal cost. Whether your home is old or new, purchasing a home warranty with appliance coverage can offer peace of mind. If you’re bringing old appliances into a newly constructed home, you’ll likely benefit from coverage.
You may consider investing in home systems coverage, too. Your builder’s warranty may cover all or most of your home systems, but only for a limited time. A comprehensive home warranty will protect home systems once the builder’s warranty expires. It may also cover items excluded by the builder’s warranty such as your garage door opener.
Ultimately, the choice will depend on how much coverage you desire on your new home and its components. You may not feel that a home warranty is worth it while your home is still under its builder’s warranty. Additionally, because home warranties primarily cover wear-and-tear damage, your appliances and systems may not be old enough for a home warranty to provide additional peace of mind.
Not everyone has adequate savings to cover unexpected appliance breakdowns after purchasing a new home, so a home warranty could aid in an emergency. Also, your builder’s response to issues may be much slower than that of a home warranty provider. Weigh the financial pros and cons before making your decision.
Is a Home Warranty for New Construction Worth It?
Whether you need a home warranty on new construction depends on your financial situation and desired coverage level. While your new home is still under its builder’s warranty and appliances are covered by manufacturer’s warranties, you may not need a separate home warranty plan.
However, if you depleted your savings to purchase the home and desire added peace of mind, a home warranty can fill in the gaps. We recommend gathering quotes from at least three companies to ensure that you find the right coverage and the best deal.
FAQs About Home Warranties for New Construction
How long is a warranty on a new house?
According to the U.S. Federal Trade Commission (FTC), the warranty on a new house lasts from one to 10 years, depending on the component. Builders typically cover their workmanship and materials with a one-year warranty. HVAC, plumbing, and electrical systems generally have a two-year warranty, while the warranty that covers major structural defects can last up to 10 years.
What are top home warranty providers for new construction?
Liberty Home Guard and Select Home Warranty are top home warranty providers for new construction homes. Liberty Home Guard provides 24/7 phone support, a 60-day workmanship guarantee, and a selection of 38 add-on coverage options.
Select Home Warranty offers budget-friendly plans with affordable service fees, generous discounts, and special perks for new customers. The company may require maintenance records to cover repairs, but that shouldn’t be an issue if you live in a newly constructed home.
What is the difference between a home warranty and homeowners insurance?
The main difference between a home warranty and home insurance is the type of events and damage they cover. Both policies offer some protection for home systems and appliances. Homeowners insurance typically covers one-time events such as theft or natural disasters while a home warranty covers normal wear and tear.
What is the warranty process for a new home?
Newly constructed or remodeled homes come with a builder’s warranty which is included in the cost of your home. As the new homeowner, you can purchase a separate home warranty, also known as a service contract, at any point.
Our Rating Methodology
We back up our home warranty ratings and recommendations with a detailed rating methodology to objectively score each provider. We conduct research by speaking with company representatives, requesting quotes, analyzing sample contracts from each company, and conducting focus groups and consumer surveys. We then score each provider against our review standards for coverage, cost, trustworthiness, plan transparency, customer support, and flexibility to arrive at a final score on a 5-point rating scale.
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