Latent Defects Insurance

Latent defects insurance (LDI) provides protection for new building projects, builders and property buyers for long tail defect risks and remediation.

LDI cover provides protection for structural building defects discovered after works are completed. Taken out by developers when a project starts, it protects the property owner against major issues for 10 years from the date of the occupancy certificate. The cover is attached to the property rather than the developer or builder and must be purchased before construction commences

LDI provides cover for the cost of repairing, replacing and reinforcing the insured building when a covered inherent defect is detected within the insurance period. Notably the cover doesn't require a subrogation legal claim to activate the policy, saving the developer or builder from the costs associated with defect losses.

LDI also offers expanded capability, including:

• alternative accommodation cover
• quality assurance inspection support during construction
• protection from litigation
• ability to market the 10 year assurance to purchasers.

Quality construction protection for new buildings

LDI product features include:

• Building type: Class 2-9 (such as multi-unit apartment buildings, commercial properties from industrial to retail to factory and public property buildings like hospitals, schools, and residential care)
• Value from $2-50 million, additional cover available on application
• Insured property: all major elements (including structural, fire safety systems and waterproofing)
• 10 year indemnity period
• Insured: owners and subsequent owners
• Policy purchaser: developer
• Premium: average indication 1.5% to 2% of construction value
• An insurance claim is triggered by discovery of an existing or imminent defect.

A technical inspection service is mandatory on buildings to qualify for LDI cover. This is an independent survey of key design and construction phases and processes, monitoring and auditing the quality through the entirety of the build.

Key advantages of latent defect insurance

The benefits that LDI provides apply to building owners from construction to completion with a 10 year indemnity post occupancy certificate.

Affordability: developers with a sufficient Independent Construction Industry Rating Tool (iCERT) score qualify for premium benefits.

Longevity: the 10 year life span of LDI covers current and subsequent owners after contract works liability has expired.

1^st party cover: no requirement for the building owner to make a claim against building professionals who may have been responsible for the defect.

A technical inspection service is mandatory for buildings to qualify for LDI cover. This is an independent survey of key design and construction phases and processes, monitoring and auditing the quality through the entirety of the build.