Helping to cover the cost of repairs to buildings

We arrange latent defects insurance to help cover the repair costs on residential, commercial and mixed-use developments.

What is latent defects insurance?

Latent defects insurance covers the cost of repairs or rebuilding for structural damage that appears months or years after completing a new-build or conversion project. These defects can be caused by design or construction faults, or faulty materials, which can be disruptive, costly, and have a serious impact on your business, or future purchasers of new homes.

Latent defects insurance helps mitigate risk and is essential for property developers, funders, owners, or tenants. It provides security, encourages investors, accelerates sales and lettings, and makes future property sales easier. There are two distinct policy types of latent defects insurance:

  • Residential structural warranties (also known as building warranties)
  • Commercial latent defects Insurance (also known as inherent defects insurance).

Both insure against property damage due to defects in design, materials, and workmanship for 10 or 12 years. They benefit the premises owner and respond to damage without requiring proof of negligence.

Who needs latent defects insurance?

Latent defects insurance can benefit various parties depending on the type of build and its stage in the construction process. The ultimate beneficiaries are usually the owner and/or occupier, although they might not be the ones purchasing the insurance. Here are a few examples:

  • Property Developers/House Builders often buy latent defects insurance to protect their investment or pass on the coverage to future owners, whether they plan to sell the property or retain it as an asset.
  • Main Contractors may be required to obtain a building warranty on behalf of their clients. While they may not directly benefit from the warranty, they need to meet the requirements of the Defects Insurance Period.
  • Registered Providers/Housing Associations often rely on appointed main contractors to secure a Building Warranty. However, they can benefit from the coverage if they choose to retain housing units for rent or shared ownership arrangements.
  • Property Owners are the ultimate beneficiaries of a building warranty and latent defects policy. They typically receive the policy after purchasing a commercial or residential property, and it transfers to subsequent owners.
  • Mortgage Lenders and 3rd Party Funders have a vested interest in protecting their investment, so they often have their interests noted under a warranty. This ensures financial security in case of damage caused by latent defects.

What are the benefits of latent defects insurance?

Latent defects insurance provides numerous benefits. It covers post-completion structural damage repairs without the need to establish fault or prove negligence, avoiding complex litigation. The policy can be transferred to future owners without limitations, reducing risk for property developers, funders, and owners or tenants. It includes coverage for defects in design, workmanship, or materials, with optional extensions for Mechanical & Electrical defects and Loss of Income. Additionally, it reduces reliance on Collateral Warranties and Professional Indemnity insurance.

What does latent defects insurance cover?

Gallagher can help with latent defects insurance for a range of residential, commercial, and mixed-use developments. Whether you're working on a self-build project or a large-scale development, we've got you covered. Our policies can protect you from inherent or structural issues, and we offer coverage for speculative, non-speculative, and completed projects.

We offer a variety of product approaches that are customised to fit the needs of developers and investors. We work closely with you to determine the best exit strategy, ensuring that policies can be easily assigned to individual or institutional purchasers.

We provide UK Finance compliant policies for private, open market residential schemes. These policies meet the requirements of homeowners purchasing newly built or converted properties, typically requiring 10-year cover.

We offer protection to registered providers, such as housing associations and local authorities, as well as their tenants, for a period of up to 12 years. Depending on the criteria, we may also provide coverage for builder insolvency.

Our Commercial Inherent Defects Insurance is designed to benefit developers, owners, funders, and occupiers. It offers a more responsive solution compared to relying solely on collateral warranties supported by Professional Indemnity insurance.Our Commercial Inherent Defects Insurance is designed to benefit developers, owners, funders, and occupiers. It offers a more responsive solution compared to relying solely on collateral warranties supported by Professional Indemnity insurance.

Our Equipment Breakdown Insurance provides coverage for mechanical and electrical services installed in newly-constructed and refurbished buildings. You can choose to have this coverage as a stand-alone policy or as an extension to a latent defects insurance policy.

Why choose Gallagher

With nearly 50 years of combined experience in latent defects insurance and more than £10 billion in covered assets, our team provides expert advice you can trust. By choosing our broker-led option, you can de-risk the buying process as we’ll identify areas of risk and limit your exposure. We offer impartial advice to ensure you receive the best value and competitive premiums tailored to your needs, carefully considering your business requirements, project partners, and individual specifications.

Latent Defects Insurance Highlights

  • Covers defects in design, workmanship, or materials and ingress of water to the waterproofing envelope
  • Cover extensions available for Mechanical & Electrical defects and Loss of Income (gross profit or revenue)
  • At additional cost, waiver of subrogation rights against the Professional Team
  • Reduces the reliance on Collateral Warranties and the underlying Professional Indemnity insurance

Policy limits and exclusions may apply, please see policy wording for full terms and conditions.