Builders are no strangers to home warranties between 2 and 10, and with good reason. This critical coverage is the only way to protect builders from the long-term risk of large structural claims.
However, where to buy them, what coverage to look for and how to select the right warranty administrator is still somewhat of a mystery. As one of the most reputable 2-10 warranty providers in the industry, PWSC, a PCF company, is here to provide clarity by answering some of the most frequently asked questions from builders.
What is a 2-10 guarantee?
A 2-10 warranty is an assured protection plan that builders offer homebuyers that covers the materials, systems and structural elements of a new construction home.
The insurance-backed warranty gives new buyers assurance that if something goes wrong with the home covered by the agreement, the builder and/or warranty provider will fix the problem in accordance with construction standards accepted by the industry
Without a 2-10 warranty, builders are still subject to certain adjustments and finishes, systems and structural warranties in accordance with their state statutes. A 2-10 warranty also helps protect the builder from prolonged exposure to costly structural claims.
What does a 2-10 warranty cover?
A 2-10 warranty covers three aspects of a new construction home:
- Materials and labor – Establishes rules on the fit, finish and materials used in the construction of the home. Fit addresses how the parts fit together in the finished product. Finish deals with the integrity of the work.
- systems – Sets standards on “inside the wall” systems such as plumbing, electrical and mechanical vital to the operation of a home.
- structural – Covers defects defined in designated load-bearing elements of the home.
How long does a 2 to 10 year warranty offer?
“2-10” refers to the years of coverage associated with the warranty. However, a better name might be a “1-2-10 Warranty” as it addresses all three coverage periods.
- One year: materials and labor
- Two years: domestic systems
- 10 years – defined structural elements
The warranty coverage period begins at closing.
What is the difference between a 2-10 warranty and homeowners insurance?
A 2-10 warranty and homeowners insurance serve unique purposes and cover different aspects of the home.
- 2-10 warranty – Although terms may differ slightly between warranty providers, protection typically covers repair or replacement of major systems and structural defects due to breakdowns and defects (not associated with external factors such as vandalism or storms). A 2-10 warranty typically covers items such as HVAC systems, drywall, ceilings, and structural elements. Builders must provide homeowners with warranties on these items, whether they are covered by a 2-10 warranty or not.
- Homeowners Insurance – Provides financial protection against damage to the structure and/or contents of a home caused by covered perils such as fire, theft, water and weather. Coverage also provides liability protection against accidents to property and damage to third parties. Homeowners purchase insurance directly.
How does a 2-10 warranty benefit builders?
A 2 to 10 warranty offers builders three key benefits:
- financial – A 2 to 10 warranty with insurance gives builders financial protection against damage and defects in new construction homes. Research presented at the National Association of Home Builders shows that 25 percent of new homes experience a structural defect at an average cost of nearly $50,000 each. A 2 to 10 warranty provides financial compensation for making necessary repairs by preventing a builder from footing the bill.
- legal – Verdicts of more than $1 million related to habitability lawsuits are on the rise. Keeping homeowner disputes out of the courtroom is key to maintaining builders’ financial stability. A good 2-10 warranty should include a set of construction standards aligned with state regulations used to evaluate and fulfill repair requests. The warranty provider should also have a well-defined claims resolution process that resolves issues through mediation and arbitration rather than judges and juries.
- Customer service and satisfaction – Research published by the National Association of Real Estate Agents shows that nine out of 10 newly built homes suffer from premature maintenance problems. When buyers are likely to make the biggest purchase of their lives, the added security of a third-party insured warranty can be critical. Plus, 2-10 warranty providers like PWSC offer top-notch customer service with 24/7 filing access.
Are 2-10 guaranties required for HUD homes?
The Department of Housing and Urban Development changed the rules for FHA, VA and USDA home loans in 2021. While a 10-year secured bond was previously a requirement to secure these types of loans, HUD lifted this requirement and made it optional to meet. mortgage guarantee obligations. However, mortgage companies may still require 2 to 10 collateral based on their own loan terms.
2-10 Warranty Protection with PWSC and PCF Insurance
While 2-10 warranties may be somewhat standard, the companies that provide them are not. Who you work with for coverage, warranty administration and customer service makes all the difference.
PWSC helps protect many of the nation’s largest builders and more than 1.7 million homes with best-in-class warranty coverage. Our team of experts work with builders to meet owner expectations, protect properties and enhance their business reputation, all without breaking the bank. PWSC’s 2-10 Warranty provides 10 years of financial security and coverage against labor issues, system failures and structural defects with A-rated insurance coverage. When things go wrong, PWSC does both well for builders and buyers alike.
By Lindsay Tingler, PCF Construction Practice Leader
