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What Is a Builder Warranty and How Does It Work?
A builder warranty is a guarantee that comes included with your new home purchase. No extra cost, no enrollment required. It protects you against defects in the construction itself: faulty workmanship, substandard materials, and failures in the home's major systems. The coverage is structured in tiers, each with its own time limit, commonly referred to as the 1-2-10 model.
The Standard 1-2-10 Builder Warranty Breakdown
| Coverage Tier | Duration | What It Covers |
|---|---|---|
| Workmanship & Materials | 1 Year | Drywall, paint, trim, doors, windows, flooring, roofing materials, improper installations |
| Systems & Distribution | 2 Years | HVAC, plumbing (pipes, drains, vents), electrical wiring, garage door openers, ductwork |
| Major Structural Defects | 10 Years | Foundation, load-bearing walls, beams, girders, floor systems, roof framing, columns, footings |
This tiered structure means your broadest coverage (the stuff you see every day) expires first. By year two, only your built-in systems remain protected. By year three, you're down to structural-only coverage until year ten. Under a 2-10 Home Buyers Warranty, coverages begin the day you close and move in, providing 10 years of structural coverage, 2 years of systems surety coverage on wiring, piping, and ductwork, and 1 year of workmanship and materials coverage running concurrently with the builder warranty.
2026 State Law Changes You Should Know
Warranty rules vary by state, and a few recent changes matter in 2026:
- Florida (HB 623): As of July 1, 2025, Florida law requires builders of newly constructed homes to provide a transferable one-year warranty covering construction defects of equipment, material, or workmanship that result in a material violation of the Florida Building Code. The one-year period begins from the earlier of the date of original conveyance of title or the date of initial occupancy. The warranty must be fully transferable to any subsequent purchaser during that one-year period.
- Texas (HB 2024): Texas revised its statute of repose to reduce the effective expectation from 10 years to 6 years, and major regional builders began moving from a 10-year structure and foundation warranty to a 6-year warranty starting January 1, 2026, in line with what is required by the state. The shorter 6-year repose only applies if the builder provides a qualifying 1-year workmanship, 2-year systems, and 6-year structural warranty.
- New Jersey: New Jersey law provides limited ten-year warranty coverage against defects in materials, workmanship, and systems, and requires builders to register with the state before starting construction or offering a warranty. Homeowners typically must wait 120 days before filing a formal Notice of Claim (except in emergencies or major structural defects).
- North Carolina: Provides a statutory 6-year structural warranty independent of the builder's written contract.
Does a Builder Warranty Transfer If You Sell?
Transferability depends entirely on the builder's specific warranty contract. It is not automatic. Some builders allow the one-year and even two-year warranty to transfer to a subsequent owner. Others limit coverage strictly to the original purchaser. If your warranty is transferable, the process typically involves:
- Contacting the builder or warranty provider before closing
- Completing a formal transfer form (sometimes called a "Successive Homeowner Transfer and Acceptance" form)
- Providing proof of sale documentation
- Paying any applicable transfer fee
A transferable builder warranty can meaningfully boost resale value, so it's worth understanding your specific terms from day one. For more on how warranties factor into home sales, see our guide on home warranties when buying a house or our detailed walkthrough of the home warranty transfer process.
Home Warranty vs Builder Warranty: The Core Differences
While a builder warranty protects against construction defects, a home warranty is an optional service contract you purchase separately to cover breakdowns from everyday use. These two products serve completely different purposes, and understanding that distinction is the key to avoiding costly coverage gaps.
What a Home Warranty Actually Covers in 2026
A home warranty plan typically covers repair or replacement costs for:
- Major appliances: Refrigerator, oven/range, dishwasher, built-in microwave, garbage disposal, washer and dryer
- Home systems: Heating, air conditioning, plumbing, electrical, water heater, ductwork, garage door opener
Basic plans focus on either systems or appliances. Comprehensive plans bundle both and may include add-ons like pools, septic systems, or roof leak repair. Based on 2026 industry data, a home warranty costs $73 a month on average (about $876 per year), with prices ranging from $28 to $191 per month, and service fees averaging $108.45 per service call. Most plans cost between $350 and $900 per year, with monthly premiums between $30 and $90 and per-visit service fees between $75 and $150. High-limit comprehensive plans can run $1,200 or more annually.
Learn more about how home warranties differ from homeowners insurance to understand how these products layer together for complete home protection. You can also review our full home warranty options guide for current pricing across major providers.
What's NOT Covered by Either Warranty
Knowing the gaps is just as important as knowing what's covered. Both builder warranties and home warranties have significant exclusions that can leave homeowners with unexpected out-of-pocket costs.
Builder Warranty Exclusions
| What's Excluded | Why |
|---|---|
| Normal wear and tear or settling | Considered expected over time |
| Appliances (refrigerator, range, etc.) | Covered separately by manufacturer warranty |
| Owner-caused damage or alterations | Builder isn't responsible for post-purchase changes |
| Acts of God (storms, floods, earthquakes) | Outside the builder's control |
| Cosmetic issues (small cracks, minor paint issues) | Below the threshold of a defect |
Florida's HB 623 expressly excludes appliances or equipment covered under a manufacturer's warranty, normal wear and tear, normal house settling within accepted trade practices, damage caused by anyone other than the builder or its contractors, and acts of God such as natural disasters or lightning fires.
Home Warranty Exclusions
| What's Excluded | Why |
|---|---|
| Pre-existing conditions | Issues present before coverage begins |
| Improper maintenance or neglect | Owner responsibility |
| Rust, corrosion, or environmental damage | Not a mechanical failure |
| Code upgrade requirements | Regulatory costs not covered |
| Non-built-in items or accessories | Must be a permanent fixture |
Neither type of warranty covers damage from floods, earthquakes, or pests. That falls under homeowners insurance. Understanding the full picture helps you avoid paying twice for overlapping coverage or going unprotected in key areas.
Transitioning From Builder Warranty to Home Warranty
The most dangerous period in a new construction home's life is right after the first year expires. That's when your broadest builder coverage disappears, and if you haven't lined up a home warranty, you're fully exposed on workmanship-related issues and appliance breakdowns.
Your New Construction Coverage Timeline
| Year | Active Coverage |
|---|---|
| Year 1 | Builder warranty: workmanship, materials, systems, structure |
| Year 2 | Builder warranty: systems (HVAC, plumbing, electrical) + structural only |
| Years 3-10 | Builder warranty: structural defects only (or through year 6 in Texas) |
| Year 10+ | No builder coverage. Home warranty is your primary protection |
When to Buy a Home Warranty on a New Build
The ideal time to purchase a home warranty is 1 to 2 months before your one-year builder warranty expires. Here's why:
- Most home warranties have a 30-day waiting period before coverage activates
- Purchasing too late can leave a gap where nothing is covered
- Buying too early is fine because coverage stacks with your builder warranty on items not covered by the builder (like appliances)
For a deeper look at how the home warranty waiting period works and how to avoid a coverage gap, our dedicated guide walks through every major provider's activation rules.
For first-time buyers especially, adding a home warranty early makes strong financial sense. Explore our home warranty guide for first-time buyers for more detail on what to look for and when it's worth the cost. If you're weighing whether to skip the warranty and self-insure instead, our comparison of home warranty vs saving money breaks down the break-even math.
If you want to understand how home warranties differ from extended warranties that come with individual appliances, see our breakdown of home warranty vs extended warranty. You may also want to read our overview of new construction home warranty options tailored specifically for buyers of newly built homes, or check the 2-10 Home Warranty review since 2-10 HBW backs many builder warranties nationwide.
Frequently Asked Questions
What is the difference between a builder warranty and a home warranty?
A builder warranty is included with your new home purchase and covers defects in workmanship, materials, systems, and structural components for defined periods (typically 1, 2, and 10 years). A home warranty is a separate, optional annual service contract that covers the repair or replacement of home systems and appliances due to normal wear and tear. Builder warranties protect against construction failures; home warranties protect against breakdowns from everyday use. They are complementary products, not substitutes for each other.
Does a builder warranty cover appliances in a new home?
No. Builder warranties specifically exclude appliances such as refrigerators, ovens, dishwashers, and washers/dryers because those items are covered by the manufacturer's own warranty (typically one year). Once the manufacturer warranty expires, appliances are no longer protected unless you have purchased a separate home warranty that includes appliance coverage. This is one of the most common and costly coverage gaps for new construction buyers to overlook.
When should I buy a home warranty if I have a builder warranty?
You should purchase a home warranty 1 to 2 months before your one-year builder warranty expires. Most home warranty providers have a 30-day waiting period before coverage activates, so timing your purchase in advance ensures there's no gap. You can also buy a home warranty on the day you close, since it will cover appliances immediately and then provide ongoing protection as each tier of your builder warranty expires.
Can I transfer my builder warranty to a new owner if I sell my home?
It depends on the specific builder and warranty terms. Some builders allow one-year and two-year coverage to transfer to a subsequent buyer, while others limit coverage to the original purchaser only. In Florida, HB 623 now mandates that new construction warranties transfer to subsequent owners within the first year of coverage. Typically you'll need to notify the warranty provider, complete a transfer form, provide proof of sale, and possibly pay a transfer fee.
What happens if my builder goes out of business before my warranty expires?
If your builder goes out of business, any express warranty tied directly to the builder may become unenforceable, but you often still have recourse. Many new construction warranties are underwritten by insurance companies and outlast a bankrupt developer, so the insurance company will pay for covered repairs even if the builder is no longer in business. Some states also maintain security funds (New Jersey's New Home Warranty Security Fund is one example) that cover repairs if the builder can't. Always confirm your warranty is backed by a third-party insurer, and consult a construction-defect attorney if you need to pursue claims after a builder shutdown.