New Home Warranty: The 2-5-10 Year Homeowner Insurance Program
What is the 2-5-10 Year Home Warranty?
The 2-5-10 year home warranty insurance is the minimum standard of coverage homes built after July 1st 1999 receive in accordance with the Homeowner Protection Act.
How was the Homeowner Protection Act created?
In 1999 the government needed to increase consumer protection for new home buyers and created the Homeowner Protection Act. The new Act set out regulations for a residential builder licensing program and mandatory third-party home warranty insurance for new homes.
The Homeowner protection Act resulted in the creation of the HPO or Homeowner Protection Office. The HPO now grants license to residential builders and ensures that all homes built after 1999 can only be built by licensed builders. These homes are also covered by a standard home warranty insurance policy.
Home warranty insurance is provided by companies approved by the Financial Institutions Commission and must also meet the requirements of the Homeowner Protection Act. The standards of coverage, commencement, exclusions, and limits on coverage are set by the government to ensure consistency and clarity.
2-5-10 Minimum Standards of Coverage Required
Home warranty insurance for new homes includes a preset amount of minimum coverage known as the 2-5-10 year home warranty.
- 2 Stands for 2 Years Warranty on Labour and materials
New homes will have a minimum of 2 years warranty for the labour and materials used to build it. There are some limits to the amount that this can be.
- 5 Stands for 5 Years Warranty on The Building Envelope
The building envelope warranty includes coverage for water penetration.
- 10 Stands for 10 Years Warranty on The Structure
Additional Coverage Terms
Any defect in materials and labour is covered for 12 months on detached homes and non-common property strata buildings. Any defect in materials and labour is covered for 15 months on common property of strata buildings. Any defects related to delivery and distribution systems such as electrical, plumbing, heating ventilation, air conditioning, etc. that are part of materials or labour are covered for 24 months on all buildings.
Home warranty insurance comes into effect at few different times depending on the structure, they are as follows.
Detached Dwelling Units
Custom homes are covered from the date of first occupancy or the date of the first occupancy permit, whichever happens first.
Spec. homes are covered from the date of first occupancy or the date the legal title transfer, whichever happens first.
Strata units are covered from the date of first occupancy or the date the legal title transfer, whichever happens first.
Common Properties are covered from the date of first occupancy or the date the legal title transfer, whichever happens first.
Home Warranty Insurance Exclusions
The Homeowner Protection Act specifies that insurance companies can exclude certain aspects of the home or property from their policies
- Non residential detached structures
(parking structures, recreational and amenity facilities in multi-unit buildings are covered)
- Commercial use areas
- Curbs and lanes
(driveways are covered)
- Site grading
- Surface drainage
- The operation of municipal services
- Septic tanks and fields
- Water quality
- Water quantity
- Normal wear and tear
- Normal material shrinkage from construction
- Using a new home for nonresidential purposes
- Labour and design supplied by the owner
- Damage from anyone other that the residential builder
- Damage from insects or rodents
- Owner failure to prevent or minimize damage from acts of nature
Warranty Claims Limits
Primarily detached dwelling units are covered for the lesser of the first owners purchase price or $200,000 dollars.
Strata Units are covered for the lesser of the first owners purchase price or $100,000 dollars.
Common Properties are covered for the lesser of $100,000 times the number of dwellings units, or $2.5 million per building.
Home Warranty Insurance Resources
If you have any further questions about the 2-5-10 Year Home Warranty Insurance program you can contact the Homeowners Protection Office, BC Branch.
Toll-free in Canada: 1-800-407-7757