Latent defects insurance (often called structural defects insurance or inherent defects insurance) is a specialist construction insurance policy designed to protect a building owner (and often future owners or funders) against hidden defects that only become apparent after practical completion.
A “latent defect” is a fault in design, workmanship, materials, or construction that wasn’t obvious at handover. It may take months or years to show up—typically as cracking, movement, water ingress, or structural failure.
In the UK, latent defects cover is commonly arranged for:
New-build residential developments (single homes through to blocks)
Commercial builds (offices, industrial units, retail)
Social housing and build-to-rent schemes
Major refurbishments and conversions
Mixed-use developments
It’s often required by lenders, investors, housing associations, and warranty providers, because it provides long-term protection that standard construction policies don’t.
Most project teams are familiar with Contract Works (CAR) insurance, Public Liability, Employers’ Liability, and Professional Indemnity. The issue is that many of these covers are designed for:
The build phase (e.g., Contract Works)
Third-party injury/property damage (e.g., PL)
Claims alleging negligence (e.g., PI)
But structural problems can emerge years later, and the responsible party may be:
Insolvent
Untraceable
Disputing liability
Outside limitation periods
Latent defects insurance is designed to respond even when it’s hard (or impossible) to pursue the contractor, designer, or supplier.
Latent defects insurance can be relevant to several parties, but it’s usually arranged for the benefit of the building owner.
Developers use it to:
Meet lender/funder requirements
Support sales (buyers often want a recognised warranty)
Reduce post-completion dispute risk
Contractors may be asked to arrange it as part of the contract, particularly on design & build projects.
Often require robust warranty/defects cover for new housing stock and regeneration schemes.
Protects long-term asset value and can make refinancing or sale easier.
Some self-build projects can obtain cover, but underwriting is usually stricter and depends heavily on inspection and build quality.
Coverage varies by insurer and policy wording, but most latent defects policies focus on structural and weatherproofing elements.
Commonly covered areas include:
Foundations and ground stability
Structural frame (steel, timber, concrete)
Load-bearing walls and floors
Roof structure
Waterproofing and weatherproofing (often including cladding interfaces)
Drainage systems serving the building (sometimes limited)
Major defects in design, workmanship, or materials that cause physical damage
A structural defect is typically one that affects the building’s stability, strength, or ability to perform as a building. Examples might include:
Subsidence or heave due to inadequate ground investigation
Structural cracking due to design errors
Roof failure due to incorrect specification or workmanship
Water ingress caused by defective waterproofing details
Some policies also offer optional extensions for:
Mechanical & electrical (M&E) elements (less common)
Non-structural defects (usually limited)
Loss of rent or alternative accommodation (more common in residential warranties)
Exclusions are where projects can get caught out. Typical exclusions include:
General maintenance, wear and tear, or gradual deterioration
Cosmetic defects (minor cracking, shrinkage, snagging)
Defects known at inception or noted during inspections but not rectified
Damage caused by fire, flood, storm, or escape of water (usually intended to be covered under property insurance)
Defective parts that haven’t caused damage (some wordings require resulting damage)
Pollution/contamination and asbestos
Defects arising from changes in use or unauthorised alterations
Contractual disputes, penalties, or purely financial losses
Cladding and waterproofing can be particularly sensitive underwriting areas. Insurers may apply:
Higher excesses
Stricter inspection regimes
Specific exclusions for certain systems
Common terms are:
10 years (very common)
12 years (available on some schemes)
Cover usually starts at practical completion (or sometimes at acceptance/handover). Some policies also include an initial “defects liability” style period, but the key value is the long-term protection.
A latent defects claim usually involves:
A defect becomes apparent (e.g., movement, cracking, water ingress)
The owner notifies the insurer and provides evidence
The insurer appoints experts (loss adjusters/engineers)
The cause is investigated (design/workmanship/materials)
The insurer agrees scope and cost of remedial works
Policies often pay for:
Investigation costs (sometimes capped)
Reasonable remedial works to rectify the defect and resulting damage
They usually do not pay for betterment beyond restoring the building to the intended standard, unless required to comply with current regulations.
These covers are often confused.
Trigger: allegation of negligence (design error, professional mistake)
Claimant: typically the client or third party
Challenge: proving liability, policy limits, exclusions, insolvency, and long-tail availability
Trigger: physical damage/defect meeting the policy definition
Claimant: building owner (and sometimes successors/lenders)
Benefit: no need to prove negligence in the same way; designed for post-completion defects
Many funders prefer latent defects cover because it’s asset-focused and more predictable than relying on PI years later.
In the UK market, “building warranty” is often used as an umbrella term. Some warranties include:
Structural defects cover (latent defects)
Deposit protection (for buyers)
A snagging/defects period
Alternative accommodation or loss of rent
The exact benefits depend on the provider and the scheme. For commercial projects, the product may be positioned more clearly as latent defects insurance.
Premiums are project-specific. Key pricing factors include:
Contract value and rebuild cost
Building type (residential, commercial, mixed-use)
Height, complexity, and construction method
Ground conditions and site history
Cladding and roofing systems
Basement works and waterproofing strategy
Contractor experience and claims history
Design responsibility and procurement route
Inspection regime and technical audit requirements
As a rule, the more complex the risk (or the more scrutiny needed), the higher the premium and the more conditions applied.
Unlike many insurance products, latent defects cover is heavily influenced by risk management during the build.
Insurers (or their appointed surveyors) typically require:
Design review (often at key stages)
Site inspections at defined milestones
Evidence of compliance with standards and manufacturer guidance
Documentation (drawings, calculations, test certificates, photos)
This isn’t just box-ticking. If inspections identify issues and they’re not corrected, the insurer may:
Exclude that element
Delay completion certification
Decline the risk
For developers, a well-managed inspection process can also reduce disputes and improve build quality.
Assuming it covers everything: It’s not a replacement for property insurance, maintenance, or snagging.
Leaving it too late: Underwriters want involvement early, especially for complex waterproofing/cladding.
Incomplete documentation: Missing test certificates, design details, or sign-offs can delay approval.
Unclear responsibility: Design & build vs traditional procurement affects underwriting.
Non-standard methods: MMC (modern methods of construction) can be insurable, but needs early disclosure and strong QA.
Expect to provide:
Project overview (location, scope, values, programme)
Construction details (structure, envelope, roof, waterproofing)
Ground investigation reports and foundation design
Professional team details (architect, engineer, contractor)
Procurement route and contract type
QA processes and inspection plan
Fire strategy and cladding details (where relevant)
The earlier you start, the more options you typically have.
It’s not legally mandatory in most cases, but it can be commercially essential. Many lenders and institutional buyers require a recognised warranty/latent defects policy as a condition of:
Funding
Practical completion sign-off
Sale or lease
Handover to an RP (registered provider)
If you’re building for sale (especially residential), it’s worth checking buyer expectations early.
When comparing options, focus on:
Policy term (10 vs 12 years)
Definition of “structural defect” and “damage”
Whether waterproofing/weatherproofing is included and how it’s defined
Excess levels (and whether they change over time)
Transferability to future owners and lenders
Claims process and technical support
Any exclusions for specific systems (cladding, basements, flat roofs)
A policy that looks cheaper can be less useful if key elements are excluded.
Often yes, but usually only where water ingress results from a defect in waterproofing/weatherproofing that meets the policy definition. Some policies apply higher excesses or specific conditions.
Usually not. Snagging and minor defects are typically handled during the defects liability period and through contractual remedies.
Yes, many insurers will consider major refurbishments, but underwriting is more detailed—especially where the existing structure is retained.
Often the developer or building owner, with rights assigned to future owners, funders, or management companies.
It’s simply the length of cover. Some funders prefer 12 years, but 10 is common.
Latent defects insurance can be a key requirement for funding, sales, and long-term asset protection—but it’s easiest (and often cheaper) when it’s built into the project from the start.
If you’re planning a new build or major refurbishment, speak to a specialist construction insurance broker early. We can help you:
Identify the right warranty/latent defects option for your project
Navigate technical audit requirements
Avoid exclusions that can cause headaches later
Call Insure24 on 0330 127 2333 or request a quote via insure24.co.uk.
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