Latent Defect Insurance: A Definition
Insurance brokerage remains a bewildering field for the average man or woman. Like other branches of the insurance tree, the many complexities of this process tend to evade all but those with some training in the field, and the average insurance policy shopper typically has a significant number of questions and doubts to ask. express. Fortunately, reputable commercial insurance brokers will ensure that the process is as transparent as possible for their clients, often going so far as to explain certain specialized terms that are part of business “jargon.”
One of those terms, and one that applies specifically to property insurance, is ‘latent defects insurance’. Unlike many other terms in the insurance field, some customers have an idea of what this term means; however, many are still unclear on its exact meaning, so this article will seek to clarify that issue, as well as explain why latent defects insurance plays an important role in the homeowners insurance brokerage process.
What is latent defects insurance?
Latent defects insurance, also known as structural warranty insurance or simply structural warranty, is one of the most important parts of building and other property insurance policies. Its purpose is to protect an insured against property damage resulting from defects in workmanship, structural planning, design or building materials.
Unlike other policies offered by commercial insurance brokers, latent defects insurance requires no proof of fault, only proof of fault, an important nuance that can often help simplify and speed up the insurance process. Likewise, this type of policy does not rely on Architects’ Certificates, professional indemnity or collateral guarantees, allowing policyholders to protect their investment in a more profitable manner. Latent defects insurance may not entirely eliminate costs in the event that negligence must be proven against one or more parties, but it nonetheless involves significantly less expense to the policyholder than would otherwise be incurred. .
When does latent defect insurance apply?
Almost any structure is eligible for coverage through latent defects insurance. It is typically used to cover commercial or residential buildings, but it is not uncommon for such a policy to be taken out for a large car park or other less conventional structure. Of course, eligibility will vary from company to company, but most commercial insurance brokers are willing to work with the client to try to arrange coverage for their structure, so it’s always a good idea for a prospective insured to ask around and see if and how this type of coverage might fit your specific situation.
What are the consequences of not taking out hidden defects insurance?
Of course, as with any other type of clause or policy, individuals who take out property insurance are not required to take out hidden defects insurance. However, there is a good reason why most commercial insurance brokers recommend this type of policy to their clients, and why some clients even require it in advance. Simply put, restoring a defective property can be a significant investment in both time and money for everyone involved. Protecting the structure with latent defects insurance will, at a minimum, give the owner peace of mind by ensuring that a solution is in place to deal with any structural defects their property may incur. As noted above, this type of policy does not represent a one-size-fits-all solution; however, it does at least provide some peace of mind to policyholders and could save them mental, physical, and financial strain should structural defects be found in their property. This is the main reason why latent defects insurance is important to the structural insurance brokerage process, and why so many commercial insurance brokers advise their clients to purchase it.