We all know that not having the right insurance cover can be a big financial risk. Yet, nobody wants to pay for multiple policies if they more or less cover the same things. Why leave yourself out of pocket when you won’t be getting the benefit of extended financial protection?
If you want to save money, but cover all the bases at the same time, you might be wondering if you really need both a building warranty and home insurance. This blog will explain why these types of homeowner cover aren’t the same, and how they can both protect your bank account.
What is a structural building warranty?
A building warranty is a policy that’s typically taken out on a new build home. The developer usually sets this up at the start of construction, then transfers it to the buyer. With several different names for this kind of cover used throughout the industry, it’s understandable to be confused.
Sometimes it’s known as a home warranty, which is why it’s easy to conflate with home insurance. However, it’s more commonly referred to as a structural warranty or latent defects insurance, as it specifically covers the property against structural defects from poor construction or design.
Newly built properties can take time to ‘settle’ – which means that structural issues may not become apparent for months or even years after completion. No homeowner wants to find themselves on the hook for expensive repairs or replacement work, which is where this warranty comes in.
Whether it’s a new build, self-build, or commercial development, a structural building warranty gives the owner/policyholder some peace of mind. If a defect develops due to negligence during the build, a successful claim on the warranty should cover most of the cost of any corrective work.
How is home insurance different from a building warranty?
While a building warranty covers structural integrity and defects that the builders, architects, designers, or developers were responsible for, home insurance is completely separate. Homeowners set up this type of cover themselves when they move in or take ownership of the property.
Unlike a structural warranty, typical home insurance policies cover other kinds of damage to the home. Building insurance – which, again, may sound similar but is not the same thing as a building warranty – usually covers property damage caused by fire, extreme weather, or accidents.
Contents insurance protects your possessions inside the home (or anywhere on the property), which definitely isn’t included in a structure-only warranty. Latent defects insurance isn’t concerned with vandalism or theft of your belongings, and defective construction isn’t part of home insurance.
It’s possible to purchase the two types of home insurance separately as needed, or together in an inclusive policy. Standard cover can include legal expenses for third-party injury claims, but often excludes damage caused by rare circumstances like natural disasters, riots, or wars.
Why would you need both home insurance and a structural warranty?
Since these two policy types cover different things, it’s worth having both a structural warranty and home insurance in place to give your property the best level of financial protection. If you only take out one type of insurance and not the other, you’re making yourself vulnerable to future risks.
Unless you want to leave yourself liable for repair or replacement expenses for any part of the structure, the whole property, and anything inside, it’s best to have both. Since this reduces your financial risk, it also makes it easier for you to secure a mortgage when buying the home.
The majority of banks and lenders expect mortgage applicants to have a structural warranty already set up and at least a commitment to set up a home insurance policy before moving in or making use of the completed property, though building insurance specifically is their main concern.
It’s advisable to check with the seller and/or developer that the property has a structural warranty attached before agreeing to buy it, and that you set up building insurance yourself as soon as possible. Contents insurance can wait until you’ve actually moved your belongings in.