Reviewed by Stefan Tirschler
Updated September 9, 2022
home war·ran·ty | ˈhōm ˈwȯr-ən-tē
Definition: A guarantee by the builder of a home that certain components of the home will be free of defects for a specified period of time.
The cracked concrete in the basement is covered by the home warranty.
When you hire someone to build a new home for you, it’s nice to have some assurance that they’ll do a decent job.
That’s why home warranties exist.
A home warranty is a guarantee from a home builder that their work is going to hold up over time. If it doesn’t, they’re responsible for repairs. If anything does go wrong, the home warranty ensures that the homeowner doesn’t foot the bill for shoddy workmanship.
Some warranties will even pay for the homeowner to stay (through loss of use coverage) in a hotel while the home is repaired, if necessary.
Home warranties don’t last forever; various parts of the house may be under warranty for anywhere from 1 to 10 years.
A home warranty covers defects caused by the workmanship of the home builder or the materials they used. There are three categories into which defects fall:
Home warranties have different levels of coverage that change over time. Starting when the build is complete, the first phase is usually 1 or 2 years. During this time, any defect in the labour or materials of the contractor is under warranty.
If anything goes wrong with the house because of the work the builder did or the materials they used, the warranty will cover repairs. For example, if the roof starts leaking because the contractor cheaped out on shingles, that’s covered by the home warranty. If the roof starts leaking because of a windstorm, you’d need to look to your home insurance policy for coverage.
The next part of home warranty usually includes 2-5 years of coverage and covers the building envelope.
What’s a building envelope?
It’s the name for every part of the building that separates inside from outside. Walls, windows, the roof, and the foundation all form part of the building envelope.
The building envelope warranty protects the owner if water starts to leak into the home through the roof or ground, but only if it results from defects in the original workmanship.
Finally, the last part of home warranty covers the building’s structure. This warranty often lasts 7-10 years. If a load-bearing part of the home develops a problem, or the structural integrity of the home is otherwise weakened, the warranty will cover repairs.
Structural defects warranty once again only covers problems stemming from the labour or materials used in the original construction.
This is only a general overview of home warranties. Their coverage varies from province to province and from contractor to contractor. If you have a home warranty, make sure you review your warranty’s coverages and exclusions.
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If you’re building a new home, one of the first things you should do is find out about the warranty.
Before you sign a contract with a builder, learn about the warranty they offer. What does it cover? How long does it last? What does the warranty exclude?
Verify that the builder is registered with an approved warranty provider.
As construction on your new home nears completion, your builder will take you on a walk-through. During the walk-through, note every defect you find. Even seemingly small problems like a sticky door or a loose floorboard.
Ask your builder how they will address those defects.
Your contractor will also explain what you need to do to operate and maintain your home, particularly HVAC, electrical and plumbing systems. The homeowner has a responsibility to do their part in keeping up the building.
Home warranties are mandatory in BC, Alberta, Manitoba, Ontario and Quebec. They’re optional (but recommended) in other jurisdictions.
Each province that mandates home warranties has requirements for what they include. For example, BC’s mandatory minimum home warranty is known as a 2-5-10:
The warranty includes 2 years of coverage on labour and materials, 5 years on the building envelope, and 10 years on the structure.
Ontario, meanwhile, has a 1-2-7 system that follows the same pattern.
If you want to find out more about home warranties where you live, check with a provincial housing organization.
A home warranty protects the homeowner financially if parts of their home fail due to flaws in material or construction. Warranties don’t last forever; once the warranty period is over, the homeowner becomes responsible for any repairs.
Home insurance, meanwhile, protects the home from sudden and unexpected events. Home insurance policies cover loss from things like fires, floods, break-ins or vandalism. They specifically exclude damage caused by wear and tear or poor maintenance.
Home insurance policies don’t end at a set time the way warranties do. Instead, they are renewed annually. Every home, new and old, should always have insurance coverage.
Home warranties protect homeowners if something goes wrong with their new home because of poor workmanship or material choice by the builder.
Home warranties only cover problems relating to the work done by the builder. Homes under warranty still need an active home insurance policy.
Some provinces have made home warranties mandatory.
Looking for another insurance definition? Look it up in The Insurance Glossary, home to dozens of easy-to-follow definitions for the most common insurance terms. Or, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.
About the expert: Stefan Tirschler
Stefan is responsible for underwriting leadership, market expansion, and product research and development for Square One's operations. Stefan has earned his Fellow Chartered Insurance Professional designation, and maintains a level 2 general insurance license in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario. Stefan is also an Education Committee member and CIP/GIE instructor for the Insurance Institute of Canada.
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