Whether you are having a home constructed or purchasing a newly built house, you should make sure the builder has taken out home warranty insurance. This insurance is different from the homeowners insurance, and aims at minimizing your losses, should the builder fail to complete the home or refurbish it as per the agreement. One important thing you should know about this insurance is that it is applicable only in case of unforeseen losses, due to death, bankruptcy or disappearance of the builder, and not when he or she is still in business.

The home warranty insurance is given to all builders who meet the specified eligibility criteria. This warranty insurance should be obtained before the builder takes any kind of payment from the home owner, or start the work as per the contract. This insurance should also be obtained by developers before they start the construction of the properties they wish to sell. Also, an owner builder who wishes to sell his or her home, which is not more than 6 years old, should get this insurance before entering into a sale agreement with the buyer.

Usually, home warranty insurance covers the owner for losses due to any kind of breach in fulfillment of the warranty provided by the builder, developer or seller. The cover is for a period of 7 years, and any kind of unfinished work or defective work that has not been completed because of the builder’s death, disappearance or bankruptcy can be claimed within this period.