If you've bought a newly built home, or you're considering it, you've likely heard about home warranty insurance -- also called the 2-5-10 warranty, third-party warranty or mandatory warranty.
What is home warranty insurance?
It's Canada's strongest construction defect insurance. Since July 1, 1999, all new single-family and multi-family homes built for sale in BC have been required by law to carry mandatory third-party home warranty insurance for construction defects.
While independent insurance companies provide this coverage, the Homeowner Protection Act sets minimum standards of coverage, commencement dates, exclusions and limits to ensure a consistent level of consumer protection.
What types of homes aren't covered by home warranty insurance?
Several types of homes are not required to carry home warranty insurance, including those built by owners, mobile homes and floating homes.
How does home warranty insurance protect homeowners?
The warranty protects homeowners from a range of construction defects related to materials and labour for designated periods of time:
- two years on labour and materials (some limits apply)
- five years on the building envelope (including water penetration)
- ten years on the structure
What is excluded from the coverage?
The coverage may exclude:
- design, materials or labour supplied by anyone other than the builder, their workers or subtrades
- landscaping
- non-residential detached structures (e.g. garages)
- commercial use areas
- roads, curbs and lanes (but walkways and driveways are covered)
- site grading and surface drainage, except as required by the Building Code
- the operation of municipal services
- septic tanks and fields
- water quality and quantity
Other excluded defects include normal wear and tear, damage by anyone other than the builder, damage by insects or rodents, acts of nature, and failure of an owner to prevent or minimize damage or carry out proper maintenance.
What are the limits on coverage?
For fee-simple single-family homes, coverage is the lesser of $200,000 or the first owner's purchase price.
For strata homes it's the lesser of $100,000 or the first owner's purchase price.
For common strata property, coverage is limited to the lesser of $100,000 times the number of units, or $2.5 million per building.
Where can I learn more?
Read your policy thoroughly for coverage details. And it's a good idea to download the free Guide to Home Warranty Insurance in British Columbiafrom the Homeowner Protection Office.
You can also search or download the HPO's free Residential Construction Performance Guidefor more information. It explains how new homes should perform and which defects -- including possible defects in design, materials or workmanship - are covered under home warranty insurance in British Columbia. Homeowners are using the guide to make more informed decisions and to self-evaluate possible defects.
