If you’re in the market for a new home or recently purchased one in British Columbia, you’ve likely heard about new home warranty insurance — also called the 2-5-10 warranty, third-party warranty or mandatory warranty.

But what is home warranty insurance?

In short, it’s Canada’s strongest homeowner construction defect insurance. Regulated by the Homeowners Protection Office (HPO), all new single family and multi-family homes for sale in British Columbia are required by law to carry mandatory third party insurance for construction defects. All licensed and registered builders are required to receive approval from the HPO prior to starting construction.

How does it work?

While independent insurance companies provide this coverage, the HPO sets minimum standards of coverage to ensure a consistent level of homeowner protection. However, in some cases, builders have elected to go above and beyond standards and provide homeowners with an extended, or 2-10-10, warranty. Licensed registered builders are required to purchase the new home warranty from a registered third-party insurer for each home they build. The cost of this insurance is built into the purchase price of the home, commences at the time of occupancy or legal transfer to the first home owner, and stays with the home regardless of transfer of ownership.

Ok, but what’s with the 2-5-10?

The warranty protects homeowners from a range of construction defects related to materials and labour for specified periods of time:

• Two Years Two years on labour and material defects refers to items or issues that are specific to the interior of the home. Many of these items will be addressed at time of deficiency walk-though with your builder prior to occupancy. However, in the event that deficiencies are missed, the first 12 months covers items such as damaged appliances, improperly installed cabinets, scratched floors, paint defects, etc. For major systems such as plumbing, electrical and heating the warranty extends to 24 months. In multi-family homes, common property areas are covered for 15 months.
• Five Years Of particular importance with our wet climate, the 5-year warranty period pertains to the building envelope and primarily concerns issues that can be caused by water penetration. This covers components that separate the indoors from the outdoors, such as exterior walls, foundation, roof, windows and doors.
• Ten Years The ten years on labour and materials defects refers to issues that result in the failure of a load-bearing part of the home, or causes structural damage to the foundation. Just as important as what’s included in your warranty is what’s excluded. To avoid any surprises, be sure to read your warranty policy thoroughly to understand key dates, terms, limitations and your obligation as a homeowner to properly maintain your home.

For any questions visit the Homeowner Protection Office website, download the Guide to Home Warranty Insurance in British Columbia, or call 1-800-407-7757.