Builder Warranty vs. Home Warranty

How builder warranties and home warranties differ

Builder warranties and home warranties both provide repair coverage for homes. However, they differ in key ways. 

A builder warranty is a service contract provided at no additional cost by the company that builds a new home and covers a wide range of items throughout the home, including the structure itself. Home warranties are optional coverage for major home systems and appliances sold by third-party providers.

The table below outlines the key distinctions between both types of warranties.

Builder warranty coverage and timelines

A builder warranty provides comprehensive coverage for a newly built home, but term lengths vary by item category. See the table below for a breakdown of what builder warranties cover and for how long.

Common builder warranty exclusions

Builder warranty contracts list items and causes of damage they don’t cover. While the specific list varies between contracts, most builder warranties feature common exclusions such as:

• Appliances and other items covered by manufacturer warranties
• Damaged caused by homeowners, intentional or accidental
• Normal wear and tear
• Environmental damage
• Damage from fire, vandalism and other sources covered under a homeowners insurance policy
• Unapproved homeowner modifications
• Cosmetic damages like small cracks

Home warranty coverage for systems and appliances

Compared to builder warranties, third-party home warranty companies offer narrower coverage, protecting only a home’s major systems and appliances. They cover repairs for issues caused by normal wear and tear to items such as:

• Covered systems: Built-in appliances, electrical systems, ductwork, HVAC units, plumbing systems and water heaters
• Covered appliances: Dishwashers, dryers, garbage disposals, ovens, ranges, refrigerators and washing machines

Home warranty providers typically offer multiple coverage levels for homeowners to choose from. Lower-tier plans may only cover appliances or home systems but sometimes protect a limited selection of both. Premium-tier plans provide comprehensive coverage for many systems and appliances and sometimes higher coverage limits, while mid-tier plans fall in the middle.

Home warranty exclusions

Like builder warranties, home warranties list exclusions for items and causes of damage that aren’t covered under the contract. Common home warranty exclusions include:

• Damage from severe weather, property crime and other sources covered by home insurance policies
• Pre-existing conditions
• Damage due to improper maintenance or neglect
• Structural damages
• Items installed improperly
• Secondary damages caused by a covered issue, such as water damage from a burst pipe
• Items that have been modified without approval

Home warranty add-on coverage

Most home warranty companies also offer individual coverage options you can add to your plan. The list of add-ons varies significantly between providers, but you can find coverage for items such as:

• Garage door equipment
• Pools and spas
• Guest suites and buildings
• Roof leaks
• Well pumps
• Septic systems
• Sump pumps

Home warranty costs

Based on our research, a home warranty usually costs between $350 and $900 per year, or about $62 per month on average. However, some high-level plans can cost up to $1,400 per year. The cost of a home warranty depends on the provider, the level of coverage you choose, your location, details about your home and, in some cases, the service fee you select.

Home warranty service fees and coverage limits

Two other important aspects of home warranties are service fees and coverage limits. Both affect the cost-to-coverage ratio of a home warranty plan and can be deciding factors when comparing quotes.

Service fees are payments homeowners must make toward covered repair appointments, similar to an insurance deductible. They vary by provider and sometimes by repair category but tend to range from $75 to $150 per appointment.

A coverage limit is the maximum amount a home warranty provider will pay toward a claim. This limit varies widely by provider and by item category. Most coverage caps fall between $500 and $2,000, but limits can reach $6,000 for items like HVAC systems. Some providers offer unlimited coverage for certain items.

Claims and disputes for each warranty

The processes for filing and disputing claims are different for builder warranties and home warranties. However, there are a few things you should do before making a claim against either type of service contract:

1. Identify your warranty administrator

The warranty administrator is the company that services claims. Some builder warranties are administered by the construction company, but others use third-party administrators to handle claims, payouts and disputes. Most home warranty providers administer their own coverage, but not always. Either way, your service contract will list the administrator and its contact information.

2. Document the issue

You may not be asked to provide evidence of the problem in order for a claim to be approved, but it’s a good idea to gather it just in case and for your own records. Take photographs that clearly show the problem and the surrounding area. It’s also a good idea to create a written timeline noting when you first spotted the problem, when you called, when the service technician arrived and other details.

3. Gather your service records

Especially with home warranties, you may be asked to provide service and maintenance records to rule out owner fault or negligence as the cause of the problem. Keep your records on hand before submitting a claim.

How to file a builder warranty claim

Follow the steps listed below to file a claim against a builder warranty:

1. Collect the photographic evidence you took to support your claim and any relevant service records.
2. Prepare a written claim for the warranty administrator that clearly details the problem. 
3. Submit the claim in writing to the administrator, along with copies of your photographs and service records. Some providers offer online claims forms; others may require you to email them.
4. The builder will schedule someone from their company or a third-party inspector to come to your home and document the problem. They will then send their assessment to the builder or administrator.
5. Your warranty administrator will decide whether to approve the claim and notify you of their decision.
6. If the administrator or builder approves your claim, they will likely hire and pay for repair services directly, rather than issue a cash payout.

How to deal with builder warranty disputes

If you feel that your builder warranty claim has been unfairly denied, you can dispute it. First, try to resolve the issue directly with the warranty administrator. Provide as much evidence to back up your claim as possible and look for language in the contract you can point to that supports your case.

The final option, if you can't resolve the dispute to your satisfaction, is to file a lawsuit against the administrator. However, many builder warranty contracts require you to enter into a formal mediation process before you can sue.

How to file a home warranty claim

Use the steps listed below to file a home warranty claim:

1. Find your administrator’s official channel for filing claims. Some use an online submission form, some process claims over email, and others require you to call.
2. Use the appropriate channel to describe the problem in as much detail as possible. Include information about the location of the issue, its severity and any specific parts with noticeable damage.
3. Your home warranty administrator will either assign a technician to visit your home or allow you to choose your own provider.
4. You will need to pay the service fee outlined in your home warranty contract when the technician arrives.
5. The service technician will inspect the problem and communicate with the administrator, who will use the information to decide whether to approve or deny the claim.
6. If the claim is approved, the technician will schedule an appointment to perform repair and replacement work. The administrator will pay for repair and replacement costs up to the coverage limit directly to the technician.
7. If the repair bill exceeds the coverage limit for your service contract, you will be responsible for paying the remainder.

Pro tips for filing home warranty claims:

• Only provide the facts and don’t speculate on causes of issues in written or verbal communications. Administrators can use anything you say as a reason to deny your claim if it helps their case.
• File your dispute promptly. Some contracts require you to register any disputes within a certain period of time, often 30 days, after the denial notice.
• State regulatory agencies can be effective at motivating companies to act and exist specifically to help consumers like you.

How to deal with home warranty claims disputes

You can also dispute a denied claim with your home warranty provider if you feel that the denial was issued in error. Like with a builder warranty, the more evidence you have, the more likely the administrator is to reverse their decision. Follow the steps below to improve your chances of overturning a home warranty claim denial:

1. Ask for written copies of the denial notice and the service technician's inspection report. Look for discrepancies between the details in these documents and your own observations. 
2. Read your contract carefully to see whether the stated reason for the denial matches any listed exclusions. 
3. If you feel that the reason the administrator gives for denying your claim is inaccurate, gather evidence that helps prove this. For example, if the administrator cites a lack of maintenance on a failing HVAC unit, but you have performed all required maintenance, collect bills or other records documenting maintenance services.
4. Depending on the claim amount versus the cost of the inspection, it may be worth hiring an independent inspector to provide an additional report to the administrator.
5. Submit a written appeal through the channel your warranty administrator specifies. If the company’s appeals process is digital, consider sending a copy of your appeal by certified mail with a return receipt for your records.
6. If you are unable to get a satisfactory result through the company, the next step is to file a complaint with the appropriate state regulatory agency where you live or through the Better Business Bureau. 

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