What’s the difference between a building warranty and home insurance?

Both building warranties and home insurance protect the owner’s bank account against costly repairs, but what’s the difference in their coverage? Do you really need both at the same time?

It’s understandable to want to save money by only buying the best insurance product, but you won’t be covering all the bases if you simply choose one over the other.

Let’s look into what these policies are and the reasons why investing in both a building warranty and home insurance can offer the best financial protection.

What is a building warranty?

A building warranty, structural warranty, or home warranty is a type of insurance policy taken out on a new build. The developer or builder responsible for the project usually sets up the warranty before construction starts, then transfers the policy to the new owner when they buy the property.

This is also known as latent defects insurance, because it protects the policyholder against latent structural defects. In the several years after the build is completed and settles, problems with the structure might develop, caused by defective design, materials, or workmanship during construction.

The structural warranty should cover the expense of repairs or replacement materials, giving the property owner peace of mind that they won’t be out of pocket for a problem that wasn’t their fault. These warranties can apply to new build homes, commercial properties, self-builds, and more.

As repairing structural issues can be costly, it’s better to be safe than sorry when making sure the property you’re buying has a building warranty. These policies now last for a minimum of 15 years on new build homes, and stay with the property for this duration – so, if you decide to sell your property, the warranty will be transferable to the new owner, which can be an attractive selling point for buyers.

What is home insurance?

Whereas the property developer is initially responsible for a building warranty, it’s the responsibility of the buyer to ensure they have personal insurance for their new residence or business insurance for their new premises. This cover won’t automatically come with the property when you buy it.

Home insurance covers your property against other types of damage to the building and your belongings, which the latent defects warranty doesn’t as a structure-only policy. This typically includes events like vandalism and theft, fire and smoke, and weather damage (e.g. flooding from heavy rain or falling trees from high winds).

You can purchase separate policies for building insurance (which applies to the building itself) or contents insurance (which applies to your possessions only), or opt for an inclusive home insurance policy that rolls both types of cover into one contract.

Again, you don’t want to only choose one type of coverage, and leave other elements unprotected by your insurance policy. That said, if you are a tenant or leaseholder, the landlord or building owner may be responsible for building insurance, in which case you would only be responsible for insuring your personal contents within the residence.

Home insurance may also cover you for legal expenses in the case of a third-party injury claim on your property. Standard coverage will normally exclude circumstances like extreme natural disasters, and providers may not provide cover or accept claims if you fail to secure your property (including belongings) to limit the risk of theft or damage.

Why do I need a structural warranty if I have home insurance?

As you can see, these insurance types cover different risks, so you’ll be leaving yourself open to more liabilities if you only have one of them and not the other. If you would prefer full protection for damage to the structure, the building as a whole, and everything inside it, then you’ll need a structural warranty, building insurance, and contents insurance.

If the increased risks aren’t reason enough, financial lenders will also expect you to have a structural warranty and home insurance set up before you apply for a mortgage. Since they’ll be paying for part of the property upfront, mortgage providers are unlikely to take the risk on an unprotected investment – both the structure and the building envelope need to be covered.

This will also apply if you plan to sell your property within the building warranty term, which may be likely if you’ll need to upsize or downsize within the next 15 years. Prospective buyers will need proof of this coverage to help with their own mortgage applications, so you may find it harder to make an agreeable sale if you can’t provide evidence of this protection.

If you’re in need of a structural warranty for any type of building project, why not contact us to get a no-obligation quote? We may not provide home insurance here, but we do offer bespoke building warranties, so call us on 01619 288 804 or email info@architectscertificate.co.uk to learn more.