When is latent defects insurance needed?

Any contractor or developer in charge of a construction project should strongly consider purchasing a latent defects insurance policy. Why? To financially protect themselves and future homeowners.

Not quite sure what latent defects insurance is, or what latent defects are classed as? Continue reading our guide to find out.

What are examples of latent defects?

Latent defects are flaws in the construction of a building either as a result of poor design, workmanship or materials. These defects are not immediately apparent and can only become evident months or years after the construction has finished.

Latent defects can be hidden under floors and behind walls and ceilings. They can cause serious safety problems if left unaddressed. Examples of latent defects are:

• Poor plumbing – leaking pipes, improper drainage
• Electrical issues – faulty wiring poses a fire risk
• Poorly-designed roof and structure
• Low-quality support beams and issues with load-bearing walls
• Moisture damage
• Poor installation
• Waterproofing

When is latent defects insurance needed?

Latent defects insurance can be obtained for the following buildings and projects:

• Commercial or domestic properties
• New builds or conversions
• Renovations or extensions
• Self-build constructions

Any type of newly built or converted building can benefit from latent defects insurance. The warranty can cover private and social housing, elderly and student, business and public sector buildings.

Anyone constructing such buildings should obtain latent defects insurance because it covers the quality and safety of all structural elements.

Anyone can set up a latent defects insurance policy too. It’s most common that the developer or builder will obtain it before construction begins, and the policy passes to the building owner after completion.

However, if latent defects insurance isn’t in place at the time of purchase, the homeowner may be responsible for obtaining separate cover.

If the homeowner fails to obtain the right insurance coverage, they’re opening themselves up to a large bill if latent defects are discovered in the property.

What’s excluded in latent defects insurance coverage?

As latent defects insurance policies are designed to cover the structural elements of a property, they don’t cover fixtures and fittings, or mechanical systems like central heating.

This type of warranty will only cover structural defects that aren’t found during the initial property surveys and do not become apparent until months or years after construction has finished.

The policy does not cover the costs of the following issues:

• Known defects or ones that were discovered before obtaining the insurance policy
• Abnormal use of the building or poor maintenance
• Non-approved alterations to the building, such as extensions
• Normal wear and tear – changes in colour due to ageing
• Accidental damage, weather damage, vandalism, and arson

Summary

It’s clear that, whether you’re a builder, developer or a self-builder, it’s a good idea to obtain a latent defects insurance policy.

This offers you financial protection should any unforeseen latent defects rear their ugly heads in several months or years. As a property developer or builder, you should feel it important to take out latent defects insurance so the future homeowner isn’t left out of pocket.