What is Latent Defects Insurance?
When you insure the construction of a building, whether new or an existing building, the process doesn’t end when construction is completed. Failures in design, materials, or workmanship can go undetected for months or years, when latent defects cause issues within the building and potentially compromise fire safety systems.
Rectifying such defects can be expensive, but latent defects insurance can help significantly in covering the costs of fixing the defects. We offer latent defects insurance backed by AXA Insurance, ensuring your peace of mind when developing a property.
This post-completion latent defect insurance cover is available for 15 years from the building’s completion certification date under the Building Safety Act 2022, which is brilliant for property owners. It can also cover up to the full value of rebuilding the property if required.
Why Choose ABC+ Warranty for LDI?
Our latent defects insurance packages are delivered by experts with other 30 years’ industry experience. Every package is backed by AXA Insurance for your peace of mind, ensuring industry compliance and reliability.
No hidden costs are included throughout the process, which boasts speed and agility to suit your needs. Our policies are issued in hours, not weeks.
We’re trusted by developers all over the UK to deliver a variety of insurance, warranty and certificates that comply with all necessary industry requirements.
Get in touch with our team today to discuss your needs. Give us a call on 0161 928 8804, message us on WhatsApp, or email us on abc@architectscertificate.co.uk.
What Does Latent Defects Insurance Cover?
LDI typically covers the following elements in residential projects:
This policy provides at least 10 years of cover for repair or reinstatement costs if an inherent defect is discovered resulting from inadequate design, construction faults, poor building materials, or mechanical and electrical services. The policy is structured with an initial 2-year Developer Liability Period followed by an 8-year LDI cover.
If taken out by the buyer of an off-plan property, the policy may also include protection against the insolvency of the developer or builder.
Latent defects insurance can be tailored to your individual needs, with potential extra cover available for:
This insurance can be purchased for a variety of projects and property types, including residential and commercial, speculative and non-speculative, and even completed buildings. It can be purchased by anyone who needs it, from a self-building property owner to national developers.
When you have this type of insurance, you don’t have to worry about proving negligence or determining who is at fault for the defective work. This helps to minimise disruption, allowing homeowners to access repair funds as quickly as possible following a successful claim, rather than waiting for the outcome of complex litigation to prove negligence against the developer or builder.
How Much Does Latent Defects Insurance Cost?
Like most insurance policies, latent defects insurance can be a single one-off payment or annual payments for the duration of the policy term. As each latent defects insurance policy will be tailored to the unique circumstances of the project or building, the cost will vary.
Factors that can affect the cost of latent defects insurance include (but are not limited to):
- Number, size, and type of building(s)
- Experience level of the main contractor or developer
- Construction methods and materials being used
- The rebuild value of the property (sum insured)
As you might expect, the larger and more expensive the building or development, the higher the insurance costs. However, using reputable builders with a design and materials that comply with building safety codes can help reduce the cost of latent defects insurance.
One thing that could drive the cost up is waiting until after construction has already started, or even until it’s been completed, to apply for a latent defects insurance policy. If warranty providers haven’t signed off on designs or materials, there is a greater risk of structural defects.
What Other Cover is Available?
At ABC+ Warranty, we also offer a 6-year Professional Consultants Certificate (PCC) as an alternative warranty.
This is formerly known as a CML Certificate (Council of Mortgage Lenders) and demonstrates that your professional consultant has the necessary experience and professional indemnity insurance in place, having visited your construction site to check on the progress of the build.
LDI FAQs
What’s excluded from a latent defects insurance policy?
Latent defects insurance covers problems with the building’s structural integrity. Generally, these policies don’t cover fixtures and fittings inside the property, or mechanical systems, such as heating.
An LDI policy will only cover structural defects that are not found during initial surveys and do not become apparent until months or years after completion of the building. This means that the policy will not cover the costs for damage resulting from:
- Known defects or defects discovered before taking out the policy
- Abnormal use of the building or inadequate maintenance
- Non-approved alterations to the building (e.g. extensions)
- Normal wear and tear (e.g. changes in colour due to ageing)
- Accidental damage, including weather damage, vandalism, arson, etc.
Latent defects insurance usually will not apply to anything that hasn’t been signed off under the technical audits that take place as part of the warranty process.
Can you obtain latent defects insurance after project completion?
Yes, LDI can be obtained after project completion, but this is often more complex and costly. LDI is available for completed structures so long as the appropriate checks are done, such as a technical survey.
Costs are often higher here because the risk is potentially higher, due to the building already being completed. However, many defects do not make themselves visible until years down the line, so this is a form of hedging against future issues.
Who can benefit from an LDI policy?
A variety of people and professionals can set up a latent defects insurance policy. Though the developer and/or builder typically do this before construction begins, the policy later passes to the building owner who buys the property. However, if the insurance isn’t already in place at the time of purchase, the owner may be responsible for arranging retrospective cover.
Most warranties covering structural defects are adjusted on a case-by-case basis to the specifications of the project, so this can vary, but they tend to be available for a variety of buildings, including:
- Commercial or domestic properties
- New builds or conversions
- Renovations or extensions
- Self-build constructions
These can include private or social housing, elderly or student accommodation, business premises, and public sector buildings. Essentially, any type of newly built or altered structure can benefit because latent defects insurance covers the quality and safety of its structural elements.
