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Latent Defects Insurance

Need flexible, affordable, latent defects insurance? Let Fortify Insurance compare our markets to find you great quality cover for a competitive premium. 

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What Is Latent Defects Insurance?

 Latent defects insurance covers the cost of repairing or rebuilding structural damage that appears in a property months or even years after the building is completed. These issues aren’t covered by standard buildings insurance and arise from flaws in the design, workmanship, or materials that have been used in its construction.

What Can Latent Defect Insurance Cover?

 

Latent defect insurance, also known as structural warranty insurance, building warranty insurance or inherent defects insurance, can cover:

  • Structural defects – this is the primary part of the policy.  It can cover the cost of repairing structural failures affecting the completed building. These can include foundation failures, structural movements, cracked load-bearing walls, failing concrete frames, roof failures, and wood and steel frame defects
  • Design defects – most policies will offer protection against structural damage resulting from design errors.  Amongst the most common problems are structural calculation errors, weak foundations, inadequate load-bearing walls, and structural engineering failures
  • Defective workmanship – poor building practices that result in structural, not cosmetic, damage can also be covered. Incorrect reinforcement installation, poor concrete placement, using the wrong structural connections or structural steel, and below-standard brickwork are all threats that can be insured against
  • Defective materials – issues arising from faulty or low-quality materials are a common cause of claims.  These can lead to claims over defective concrete, inadequate or faulty structural timber or steel, and defective roof trusses
  • Defective waterproofing – where waterproofing failures cause structural damage, latent defect insurance can provide compensation.  Issues like basement waterproofing failure, water tank defects, roof membrane failures and water ingress causing structural deterioration can all be covered
  • Building envelope flaws – this is usually offered as a policy extension and covers major failures to the building’s envelope, the physical barrier between indoors and outdoors. Issues that can be covered include external walls, curtain walling, cladding support, roof supports, and windows
  • Drainage – covering structural drainage failures such as underground drainage, service ducts, inspection chambers, and subterranean pipework
  • Retaining walls – if they collapse, develop structural cracking, building instability, or cause foundation movement, a claim can be made to make the repairs
  • Professional fees – investigating and remedying these issues often requires the services of structural engineers, surveyors, architects, and building control professionals. Their fees can all be claimed for
  • Demolition and rebuilding costs – should the issues be so severe that the property needs to be demolished, it will pay for everything from controlled demolition and site clearance to reconstruction.  When taking out a policy, it’s important to have the correct rebuild valuation in place.  This is the total cost of rebuilding the property and is often far higher than the property’s market valuation
  • Alternative accommodation – residential and commercial latent defect insurance policies can be extended to cover alternative accommodation costs should the building become unsafe/need to be vacated while works are carried out
  • Developer insolvency insurance – allows the policy to remain in force even if the developer ceases trading, the contractor becomes insolvent, the architect retires, or the structural engineering firm no longer exists.  In these scenarios, the building owner can claim directly against the insurer rather than relying on legal action against the original construction team

What Isn’t Covered By Latent Defect Insurance?

  • Reduced property value owing to emerging issues
  • Issues arising from a lack of general maintenance
  • Cosmetic cracking
  • Wear and tear
  • Maintenance
  • Fire damage
  • Flood damage
  • Storm damage
  • Accidental damage
  • Mechanical and/or electrical breakdown
  • Normal shrinkage as evidenced by cracks in plaster
  • Pest infestation
  • Deliberate damage

Who Needs Latent Defect Insurance?

Latent defect insurance is essential for anyone who is involved in a new build, a conversion, or a major extension.  Policyholders often include:

  • Homeowners
  • House builders
  • Commercial developers
  • Build-to-rent investors
  • Commercial landlords
  • Housing associations
  • Local authorities
  • Property investors
  • Self-build homeowners
  • Pension funds
  • Commercial property owners

What Type Of Property Can Be Covered?

It’s recommended for projects involving:

  • New-build homes
  • Apartment blocks
  • Offices
  • Warehouses
  • Shops
  • Hotels
  • Student lets
  • Care homes
  • Industrial units and factories
  • Mixed-use developments
  • Build-to-rent properties
  • Self-build properties

Case Study: How Latent Defect Insurance Protected a Commercial Property Owner In Peterborough

The Challenge

One of our commercial property insurance clients, a leading local property investor, had completed a mixed-use development in London Road.  The building included ground-floor retail units with two floors of office accommodation above.

The project had been completed on time, and building regulations had been signed off.  He needed to refinance the development, and his lender requested evidence that the property was protected against structural defects.  While the contractor had provided standard contractual warranties, our client’s bank had concerns over:

  • What if the builders ceased trading
  • How pursuing any legal action against contractors or consultants would be expensive and time-consuming
  • Undiscovered structural defects could significantly reduce the property’s value
  • How future purchasers and lenders would expect long-term structural protection


So, he asked us for advice.


The Solution

After reviewing the development, we recommended a comprehensive latent defects insurance policy.  We worked with specialist insurers and surveyors and arranged cover that included:

  • 10 years of structural defect protection
  • Cover for the building’s structural elements
  • Waterproofing defects
  • Foundations and retaining walls cover
  • Load-bearing walls cover
  • Roof structure protection
  • External cladding cover
  • Professional fees
  • Demolition and rebuilding costs 


The policy was completed before refinancing, satisfying the bank’s requirements.

The Claim

Three years after completion, significant cracking began to appear around some of the windows on the upper floors.  A structural engineer discovered that hidden defects within part of the steel frame connections had caused gradual structural movement.  The issue had not been visible during construction and resulted from a design and fabrication defect that only became apparent after years of normal building movement.  Repair costs were calculated and came to:

Cost

Amount

Structural investigations

£32,500

Temporary support works

£68,000

Steel frame repairs

£245,000

Brickwork reconstruction

£78,750

Professional fees

£32,000

Total

£456,250

 

The Outcome

Because the property was protected by comprehensive latent defects insurance, the insurer accepted the claim. Engineers were appointed, and repairs began without any need for legal action. The building remained largely open for use, rental income disruption was minimised, and there was no drop in the building’s value.

Without cover, the owner could have faced a bill for over £450,000 in repairs, plus significant legal expenses and delays while attempting to establish liability.

‘I received exceptional customer service from start to finish! And was able to secure a policy tailored to my business needs. Highly recommend. Thank you!’ Harry James, 5-Star Google Review

What Policy Extensions Are There?

  • Increased limit of indemnity – ideal for high-value residential developments, commercial property portfolios, mixed-use schemes, and large commercial properties
     
  • Extended policy period – standard policies provide protection for 10 years from completion, but some insurers can offer 12 years, 15 years, or even longer

  • Building envelope extension – some policies can be broadened to cover defects affecting curtain walling, structural glazing, and cladding support.  This is increasingly important on modern commercial and high-rise residential developments

  • Existing structures extension – where refurbishment or conversion work is being undertaken, insurers may extend cover to include the original structure.  This is ideal for office-to-residential conversions, listed building renovations, warehouse conversions, and church conversions 
     
  • Mechanical and electrical (M&E) defects extension – some insurers offer limited cover for permanently installed building services where defects cause insured damage.  These can include lifts, heating systems, and air conditioning systems.  Routine mechanical breakdown and maintenance are typically excluded
     
  • Contiguous structures extension – properties that share structural elements with neighbouring buildings may benefit from additional protection to shared walls and foundations, and connecting structures such as walkways or garages
     
  • Subsequent purchaser protection – some insurers offer enhanced provisions that simplify the process of keeping the protection in place
     
  • Renewable energy systems extension – it can be extended to include structural defects affecting permanent renewable energy installations, such as solar panels and heat pumps

How Much Does Latent Defects Insurance Cost?

Latent defects insurance typically costs between 0.5% and 1.5% of the total rebuilding or construction cost for residential properties. For commercial properties, it’s between 0.3% and 1.0%.  Premiums are paid as a single, one-off upfront sum at the start of construction, which covers the 10-year policy period and includes the required technical site audits.  

 

How Can I Get A Latent Defects Insurance Quote?

Getting a quote is easy. You can call us on 01733 301520 or request your latent defect insurance quote today.  Being independent, we can compare the market to find you the cover you’ll need for a premium you’ll like.

Latent Defects Insurance

Frequently Asked Questions

Latent defects insurance covers the cost of repairing or rebuilding structural damage that appears in a property months or even years after the building is completed. These issues aren’t covered by standard property insurance and arise from flaws in the design, workmanship, or materials that have been used in its construction
 
 

A hidden flaw in the design, workmanship or materials used in a building that wasn’t discoverable during routine inspections and which only becomes apparent once the building’s occupied

Structural defects, foundation failure, defective workmanship, design and materials, basement waterproofing defects, professional fees, and demolition and rebuilding costs can all be covered

Reduced property value owing to emerging issues, lack of general maintenance, cosmetic cracking, wear and tear, fire, flood, storm or accidental damage, mechanical and/or electrical breakdown, normal shrinkage, pest infestation and deliberate damage

Homeowners, house builders, commercial property developers, build-to-rent investors, commercial landlords, housing associations, local authorities, property investors, self-build homeowners, and financial institutions such as pension funds

10 years is standard, but it can be extended to 12, 15 or even longer

No, but mortgage lenders, banks, institutional investors and purchasers often require a structural warranty before funding or buying a newly built property

No, buildings Insurance protects against insured events such as fire, flood, explosion, and storm. Latent defects offers protection against hidden structural defects resulting from problems in design, workmanship or materials after completion

Yes, it’s often arranged for self-build homes, major renovations, and high-value/bespoke homes 

Yes, for all kinds of commercial property

Yes, as policyholders can claim against the insurer. Cover generally remains in place even if the developer, contractor or design team has ceased trading or become insolvent.

In many cases, yes.  

Yes, many insurers offer cover for commercial-to-residential, warehouse, barn, and house conversions

Insurers will usually need a structural engineer’s report, architect’s drawings, construction plans, details of who’s doing the work, and a surveyor’s report 

Latent defects insurance typically costs between 0.5% and 1.5% of the total rebuilding or construction cost for residential properties. For commercial properties, it’s between 0.3% and 1.0%.  Premiums are paid as a single, one-off upfront sum at the start of construction, which covers the entire 10-to-12-year policy period and includes the required technical site audits

A specialist broker like Fortify knows the risks, has the insurer contacts to get the right cover at the right price, and can tailor cover to your needs. 

Getting expert, independent advice can help ensure your development has the right long-term protection against hidden structural defects.  If you’d like some help or advice, you can call us on 01733 301520 or request your latent defect insurance quote today.  Being independent, we can compare the market to find you the cover you’ll need for a premium you’ll like

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