Why self-builders should have Latent Defects cover
Latent Defects is an important cover and should always be taken out by self-builders, as it provides post-completion protection against damage caused by a defect in design, workmanship or materials used that may arise in the future after you’ve sold the property to a new buyer. Here, we look at what it covers and why it’s essential 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 can be transferred to the future owner without limitations, it satisfies the lender’s requirements and provides security for a new owner, facilitating an easier sale of the property. If there is a problem in the future, the policy is in place, providing full cover for any faults or defects discovered, with no need for the new owner to prove negligence, thereby avoiding expensive litigation.
Why it’s important
If you’re a building contractor or involved in a self-build project, including renovations, this cover is vitally important and should not be neglected, because if something goes wrong in the future, you may have to pay for the costs of repair or replacement, leaving you financially exposed. This could prove costly and disruptive, and have a serious impact on your business or finances.
It’s important to point out that standard house or property insurance doesn’t provide you with full cover for a self-build project, nor does Contractors All Risks insurance. You need to take out Insurance that provides:
- 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 TMD
TMD 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 703 000 or email us at insurance@mcdonaghs.co.uk