Do you need a home warranty for new construction?

Key points

• Manufacturer’s and builder’s warranties cover new-construction appliances, materials and structural components for a few years.

• Manufacturer’s and builder’s warranties often leave coverage gaps that a home warranty can fill.

• A home warranty can limit out-of-pocket costs for unexpected appliance or system failures.

If you buy a brand-new home, you might not think you need a home warranty. Home warranties protect against older appliance and system failures related to wear and tear, which wouldn’t apply to new construction. And even if new components — such as refrigerators, dishwashers and HVAC systems — do fail unexpectedly, they are usually covered under warranties provided by the builder or manufacturer.

However, manufacturer’s and home builder’s warranties don’t last forever or cover every contingency. A home warranty can offer peace of mind and financial certainty in case a major appliance or a household system malfunctions. New construction, while shiny and nice to look at, isn’t always perfect construction.

Whether you need a home warranty for a newly constructed home depends on how much potential risk you’re willing to take on. The three factors below can help you decide.

How well are your appliances covered?

Are there things that aren’t covered?

What about potential home defects?

Home builder’s warranties do not typically cover appliances, and a manufacturer’s warranty is usually limited in scope and duration. A home warranty can fill the potential coverage gaps.

Specific components, such as exterior lighting, a guest unit or roof leaks, may not be covered by warranty. Most home warranty providers offer add-ons for such coverages.

Homeowners insurance won’t always cover defects such as faulty materials or installation errors. Some builder warranties might, but you’ll want to confirm the length and scope of coverage.

What is a home warranty?

A home warranty covers failures of appliances or household systems.

For a monthly or annual premium and a service call fee, reputable home warranty companies agree to assign a technician to repair or replace broken appliances, such as your refrigerator or air conditioner, and/or failed systems, such as your electrical system or plumbing.

The home warranty provider also agrees to pay the cost of repair or replacement up to predetermined coverage limits.

What does a home warranty cover?

The components a home warranty covers depend on the plan type and contract language. Home warranty companies generally structure plans to cover appliances, systems or both, with optional add-on items available to the customer.

The following table lists examples of home appliances, systems and add-ons that home warranty providers may cover:

Appliances	Systems	Add-ons
Clothes washers and dryers	Air conditioning	Guest units
Dishwashers	Ductwork	Pools
Garbage disposal units	Electrical	Roof leaks
Microwaves	Heating	Septic systems
Ovens, ranges and cooktops	Plumbing	Spas

What is a home builder’s warranty?

A home builder’s warranty is an agreement backed by the builder that covers the permanent parts of a new or remodeled home. This may include items such as electrical and plumbing systems or concrete flooring.

Many builder’s warranties come with workmanship and material guarantees, including coverage for HVAC and electrical systems. Some builder’s warranties cover major structural defects.

A builder’s warranty covers most new construction. According to the Federal Trade Commission, homes purchased with loans from the Federal Housing Authority or the Department of Veterans Affairs require builders to purchase a third-party warranty.

The duration of a builder’s warranty varies by component. Most workmanship guarantees last one year, while HVAC and other systems are covered for two years.

A home builder’s warranty differs from a home warranty in that the builder includes it at no extra cost. You must purchase a home warranty, or service contract, separately. A builder’s warranty does not typically cover household items, small cracks in the foundation or drywall, or anything covered by a manufacturer’s warranty.

What does a manufacturer’s warranty cover?

A manufacturer’s warranty comes with new appliances to guarantee that the original maker will repair or replace the new item if it fails within the first one to three years of ownership.

Some companies offer extended manufacturer’s warranties that provide similar coverage for a longer period of time — for a price. Certain HVAC companies offer warranties that cover defective parts.

What does homeowners insurance cover?

Homeowners insurance, also called hazard insurance, covers losses or damage related to events such as a fire or burglary. It typically does not cover loss or damage from earthquakes or floods.

Home insurance does not typically cover damage to major appliances or household systems related to normal wear and tear.

When do you need a home warranty for new construction?

If you rely on warranty coverage from a builder or manufacturer, you should become familiar with the scope and limitations of those warranties. Components of newly built homes generally don’t break down in the first year, but it is important to know exactly what is covered and for how long — just in case something goes wrong.

Because of the limited scope and coverage of existing warranties for new construction, you should consider your coverage options beyond the terms of the manufacturer’s or builder’s warranties.

The International Association of Certified Home Inspectors (InterNACHI) provides a useful list of the life expectancy of new appliances and systems. Many of these components last longer than the typical one-year manufacturer’s warranty.

Here are some of InterNACHI’s examples of life expectancy for major appliances and systems: 

• Dishwasher: 9 years
• Clothes dryer: 13 years
• Clothes washer: 5–15 years
• Microwave: 9 years
• Range or oven hood: 14 years
• Refrigerator: 9–13 years

In addition, it helps to understand the role of a new construction inspection. The InterNACHI defines a home inspection as a “non-invasive, visual examination of the accessible areas of a residential property.”

Any component considered inaccessible at the time of the inspection will be excluded. This may include HVAC ductwork, electrical components that are shut down, plumbing leaks and other items that could malfunction if not properly installed or damaged during construction. 

It’s smart to test household appliances and systems before moving into a newly built home. The tests can be as simple as flushing all the toilets, turning on the dishwasher, flipping light switches and checking the hot water for all sinks, showers and baths.

How do you shop for a home warranty?

Before you buy a home warranty, consider the following factors:

• Which systems or appliances in your home require coverage?
• How much can you afford to pay in monthly or annual premiums?
• What home warranty providers carry coverage that meets your needs and budget?

If you are considering a home warranty for new construction, pay close attention to the scope and duration of existing manufacturer’s warranties for your major appliances. Available add-on options should factor into your decision as well.

What are the best home warranty providers for new construction?

It doesn’t hurt to begin shopping for a home warranty before you actually need one, but make sure you don’t buy a home warranty that duplicates coverage already in place from a manufacturer’s or builder’s warranty.

One potential differentiator for new construction is the depth of add-on options home warranty providers offer. Our research revealed that Liberty Home Guard provides a comprehensive selection of add-ons at a reasonable price.

American Home Shield does not offer the same depth of add-ons, but its plans cover conditions that other companies typically exclude, such as rust, corrosion or sediment damage. This can be handy for brand-new houses because dust and debris related to construction can play havoc with the HVAC system.

To get started, request quotes from the providers below.

What are common home warranty red flags?

When you start comparing home warranty companies, check consumer review sites such as the Better Business Bureau and Trustpilot. While many customers use these sites to lodge complaints, you can learn a lot about a company by observing how it responds publicly to unfavorable reviews.

As you peruse consumer comments, look for common themes. If a home warranty provider consistently draws criticism for poor customer service or unkept promises, move on to the next company.

Other potential red flags include difficulty acquiring a quote or estimate, lack of transparency regarding fees and coverage limits, and slow response times for service calls.

What’s next?

Ensure you need a home warranty for new construction before buying one. During the first year or two of homeownership, manufacturer’s or builder’s warranties may cover your appliances and most of your household systems.

A home warranty is a wise investment if you are concerned that certain components in your new home might not be covered. Explore your coverage options by researching home warranty companies, and make sure to collect at least three quotes from reputable providers before you make a final decision.