Latent Defect Insurance: A Definition

Insurance brokerage remains a mystifying field for the average layman or woman. Much like other branches of the insurance tree, the many complexities of this process tend to evade all but those with some training on the field, and the average insurance policy purchaser usually has a significant number of questions and doubts to voice. Fortunately, reputable commercial insurance brokers will make sure the process is as transparent as possible to their clients, often going as far as to explain certain specialist terms which form part of the trade ‘lingo’.

One such term, and one which applies specifically to property insurance, is ‘latent defect insurance.’ Unlike many other terms in the insurance field, some customers do have an idea of what this term means; however, just as many are still unclear as to its exact meaning, which is why this article will seek to clarify that matter, as well as explain why latent defect insurance plays an important role in the property insurance brokerage process.

What Is Latent Defect Insurance?

Latent defect insurance, also often known as structural warranty guarantee or simply structural guarantee, is one of the most important parts of insurance policies on buildings and other such types of property. Its aim is to protect a policyholder against property damage resulting from defects in workmanship, structural planning, design or materials of the building.

Unlike other policies offered by commercial insurance brokers, latent defect insurance does not require proof of fault, just proof of defect, an important nuance which could often help simplify and speed up the insurance process. Similarly, this kind of policy is not dependent on Architects’ Certificates, professional indemnity or collateral warranties, allowing policyholders to protect their investment in a more cost-effective manner. Latent defect insurance may not entirely eliminate costs should negligence have to be proven against one or more parties, but it nonetheless implies a significantly lower expenditure for the policyholder than they would otherwise incur in.

When Does Latent Defect Insurance Apply?

Almost any structure is eligible for coverage through latent defect insurance. It is most often used to cover commercial or residential buildings, but it is not unheard of for a policy of this type to be taken out for a large car park, or other less conventional structure. Of course, eligibility will vary from one company to the next, but most commercial insurance brokers are willing to work with the customer to try and arrange cover for their structure, so it is always a good idea for a prospective policyholder to ask and see if and how this type of cover might fit their specific situation.

What Are The Consequences Of Not Taking Out Latent Defect Insurance?

Of course, as with any other type of clause or policy, individuals taking out property insurance are under no obligation to take out latent defect insurance. However, there is a good reason why most commercial insurance brokers recommend their clients take out this type of policy, and why some clients even demand it upfront. Simply put, re-instating a defective property can represent a significant investment in both time and money for all involved. Protecting the structure with latent defect insurance will, at the very least, give the property owner peace of mind, by ensuring a solution is in place to deal with any structural defects their property may incur in. As noted above, this type of policy does not represent a one-size-fits-all solution; however, it does at least provide policyholders with some reassurance, and could save them mental, physical and financial strain should any structural defects be found in their property. This is the main reason latent defect insurance is important to the structural insurance brokerage process, and why so many commercial insurance brokers advise their customers to contract it.

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