Buying a home is a big decision for most people, one that generates a lot of stress. Making the decision to build a custom home instead of purchasing an existing home is even bigger. All of a sudden, the decisions are compounded: there are floor coverings to decide on, colors to pick out, and a myriad of other details to be decided upon during the home building process. While this can be very exciting, it can also produce anxiety for the new home owner. Questions start to surface. How do I know the custom home builder I’ve chosen is a good one? How do I protect my new home once it’s built? What if something breaks?
Of course, everyone should protect their home with a good homeowner’s insurance policy. That’s a given. But another great way to relieve some of the anxiety is by protecting your new home with a home warranty. A home warranty is different from homeowner’s insurance and covers items that are not typically covered in your standard homeowner’s insurance policy. While homeowner’s insurance covers you in the case of accidents or natural disasters, it doesn’t cover the repair and maintenance costs associated with your appliances and home systems, nor does it protect against any defects in the structure of your new home.
There are two main types of home warranties: appliance and systems warranties, and structural warranties. Let’s examine each of them briefly.
An appliance and systems warranty covers just what you’d imagine from its name. It covers repairs and maintenance that may be needed on specified appliances or systems (such as HVAC or plumbing). This type of work is typically not covered in your standard homeowner’s insurance policy. With an appliance and systems warranty, there is a cost for the warranty itself, and then you pay a set service fee if a service call is needed. Policies like this can be very cost effective because the service fee is usually less than what it would cost to get the appliance or system fixed on your own.
A structural warranty is a little different. It protects you for a set time period (typically 10 years) against structural defects that may occur which would render the house unsafe or unsanitary and therefore, unlivable. Structural warranties may also come packaged with workmanship and systems warranties, which provide additional protection for you, the new home owner. Many custom home builders offer a structural warranty with every new home they build.
That’s great, but what if your home builder goes out of business two years after he finishes your custom home? What happens then? Who pays the insurance claim if something goes wrong?
Those are great questions. Some home builders do warrant their work themselves. In this case, there is a risk to the home owner that the builder won’t be there if something goes wrong several years from now. However, the best and most prestigious custom home builders use a third party company to administer their home warranties. This is a big benefit for the home owner. By using a third party home warranty company, the builder is essentially telling you that he stands behind his work, and wants to make sure you’re protected, regardless of what happens to him. Even if he should go out of business two years after building your custom home, the home warranty will remain in place. An additional benefit to the customer is that third party home warranty companies are often very selective about the builders they work with. They only make their services available to home builders who have a proven track record of good quality construction and workmanship.
So can you buy peace of mind? Maybe not. But you can make sure your new home is covered with a good home warranty. Knowing that your investment is well protected will go a long way toward helping you sleep peacefully in your new bedroom.