Why self-builders should have Latent Defects cover
"Latent Defects" is an essential coverage that self-builders should always consider taking out. This coverage provides post-completion protection against any damages caused by defects in design, workmanship or materials used that may arise in the future, even after the property has been sold to a new buyer. In this article, we will explore what this coverage entails and why it is crucial to have it.
What is Latent Defects?
As a rule, Latent Defects (also known as Building Warranty or Structural Warranty Insurance) is generally taken out by property developers, finance providers and new build contractors for commercial and residential properties and mixed-use developments.
It provides insurance against design defects, construction faults or faulty materials that appear months or years after the build has been completed, for a period of up to 12 years, covering the cost of structural damage repair, replacement or strengthening the property. There is also the option to include Mechanical & Electrical Defects.
With Latent Defects insurance, the insurer usually appoints a surveyor to inspect and monitor the project while construction is taking place and the property is covered against faults or defects once the building works have finished.
Future security
As the policy has no limitations on its transfer to a future owner, it meets the lender's requirements and offers a sense of security to the new owner. This facilitates an easier sale of the property. In case any issues arise in the future, the policy provides complete coverage for any faults or defects discovered without requiring the new owner to prove negligence. Hence, it helps in avoiding costly litigation.
Why it’s important
If you are a building contractor or involved in a self-build project, including renovations, it is important not to neglect insurance cover. This cover is vital because if something goes wrong in the future, you may have to pay for the costs of repairs or replacement, leaving you financially exposed. Such an eventuality could prove costly, disruptive, and have a serious impact on your business or finances.
It is important to note that standard house or property insurance does not provide full cover for a self-build project, and neither does Contractors All Risks insurance. You need to take out Insurance that provides complete coverage.
- Contract Works (or Site Insurance) cover for any risks associated with the building process until the project is finished
- Equipment and Plant cover against fire and theft, whether owned or hired
- Public Liability covering injury or damage to third parties
- Employers Liability covering injury to anybody you employ, including subcontractors
- Latent Defects (or Building Warranty Insurance) covering faulty design or workmanship that may arise for a future owner when the property is sold.
Talk to NLIG
At NLIG, we can arrange Latent Defects Insurance for your self-build project or any other type of build, ensuring you are protected against inherent or structural issues. .(Subject to the terms and conditions of the policy). We can also arrange other covers, including Contract Works, Equipment & Plant, Public Liability and Employers’ Liability. To contact TMD, please call 01992 703 300 or email us at insurance@nlig.co.uk