Structural Warranty
Understanding Structural Warranty Insurance for Builders

Real estate development and construction has its ups and downs, much like a rollercoaster with its fair share of highs and lows. One moment, you’ll be riding high on booming markets, and the next, you’re dealing with the latest downturn. But that’s the nature of the game, and those ups and downs are all part of the everyday nature of the industry.

 

Whether you’re a seasoned builder or a new contractor with your first project, having structural warranty insurance is worth its weight in gold. It might sound technical, but it’s your trusty and very crucial safeguard to protect your bricks, beams, and, overall, your peace of mind. Structural warranty insurance is a concept that both builders and property owners should be well acquainted with.

 

This insurance policy plays a vital role in safeguarding against construction defects, ensuring the structural integrity of a building, and providing peace of mind for both parties involved. In this guide, we explore the ins and outs of structural warranty insurance, shedding light on what it entails, why it’s essential, and how it can help builders and property owners.

 

6 min read
  1. What Is A Structural Warranty?
  2. The Advantages of Structural Warranty Insurance
  3. What a Structural Warranty Covers
  4. Factors Affecting the Cost of a Structural Warranty
  5. Types of Structural Warranties
  6. When To Get A Structural Warranty
  7. Who Needs a Structural Warranty?
  8. How Long Does A Structural Warranty Last?
  9. Do I Need A Structural Warranty?
  10. The Coverage of a Structural Warranty
  11. The Bottom Line

1. What Is A Structural Warranty?

A structural warranty, often referred to as Latent Defects Insurance, serves as a protective insurance policy. It offers coverage against construction or workmanship defects for a specified period, typically spanning from 10 to 12 years after a building project’s completion.

This insurance is designed to cover newly constructed, converted, or renovated residential developments, ensuring the project receives financial protection in the event of potential structural defects that might emerge over time.

2. The Advantages of Structural Warranty Insurance

The primary advantage of structural warranty insurance is the peace of mind it provides to both builders and property owners. Here’s a closer look at the key benefits:

Protection Against Structural Defects

The core purpose behind structural warranty insurance is to protect against issues related to the design, workmanship, materials, supervision, construction, installation, or site preparation of a newly constructed building.  These problems might not be evident when the project is initially completed but can become apparent later on as physical damage becomes noticeable.

Avoiding Expensive Legal Battles

When it comes to

structural defects, you won’t have to worry about pointing fingers or getting tangled in costly legal disputes. Your insurance policy covers the expenses required to repair or restore the property.

Market Appeal

Having a structural warranty in effect gives your property an edge in the market and boosts its attractiveness. It’s worth noting that the vast majority of mortgage lenders and banks insist on a structural warranty as a prerequisite for granting mortgages, underscoring its significance in property deals.

3. What a Structural Warranty Covers

A structural warranty takes care of a variety of possible concerns and damages related to the stability of a building. These can encompass:

  • Structural Defects: This includes issues with foundations, columns, beams, external walls, cladding, external doors, windows, stairs, floors, and roof structures.
  • Water Penetration: Issues arising from water entering the building due to design, construction, or material concerns.
  • Drainage System: Issues with the drainage system as a result of the construction process.
  • Subsidence, Heave, and Landslip: Damages caused by ground movement, subsidence, heave, or landslip.
  • Threat of Imminent Collapse: Repairs necessary to prevent damage resulting from a previously unseen issue in the design, workmanship, or materials before the insurance coverage began.
  • Consequential Loss for Non-Structural Elements: Covers losses related to non-structural elements of a building.
  • Loss of Deposit / Insolvency: Protection in case the developer becomes insolvent.
  • Removal of Debris & Professional Fees: Covers expenses related to debris removal and professional fees.
  • Alternative Accommodation: The cost of providing alternative accommodation while repairs are being conducted.
  • Loss of Rent Receivable: Compensation for the loss of rental income during repairs.
  • Contaminated Land Remediation Expenses: Covers expenses related to remediating contaminated land.
  • Physical Health & Safety of Occupants: Addresses non-compliance with building regulations and potential health and safety issues.

4. Factors Affecting the Cost of a Structural Warranty

The price of a structural warranty depends on various factors, including: 

  • Experience of the Professional Team: This encompasses the past performance and expertise of the professionals engaged in the project, along with insights from prior projects, which contribute to the overall cost assessment.
  • Financial Capacity: The financial stability of the company or individuals participating in the project is considered.
  • Project Details: The size, value, location, and construction methods used for the development also play a substantial role. These factors comprise building expenses, site size in square meters, project location, and the construction techniques applied.

5. Types of Structural Warranties

There are various types of structural warranties, but one of the most common is the 10-year structural warranty. This type of warranty covers a wide range of construction projects, including:

  • New and newly converted homes for sale, shared ownership, private rent, and social rent.
  • Self-build properties.
  • Any change of use.
  • Refurbishments involving structural work.
  • Part-complete or repossessed developments.
  • Completed projects.
  • Contaminated sites.
  • Large mixed-use commercial and mixed-tenure structures.
  • The specific requirements for a structural warranty may vary depending on the type of project and the insurer.

6. When To Get A Structural Warranty

So, when’s the right time to consider a structural warranty for your construction or renovation project? Here are a few things to consider:

  • Risk Assessment: It’s a good idea to have your insurers take a  look at your building plans before you kick off your construction plans. This helps in assessing potential risks accurately.
  • Cost-Effective: If you want to save some cash, consider getting your insurance sorted right at the project’s start. Waiting until later down the line might mean higher expenses, possibly involving surveyor fees.
  • Progress Tracking: To ensure everything aligns with your warranty’s requirements, consider getting each stage of your project signed off as you go. It’s a great way to stay on track and compliant.

7. Who Needs a Structural Warranty?

Structural warranties offer benefits to both builders and property owners in various ways:

  • Builders: Builders can find added peace of mind for themselves and their clients by having a structural warranty. It not only safeguards their reputation but also provides a safety net in terms of financial security.
  •  Housing Associations: Housing associations, often involved in large-scale projects, use structural warranties to ensure their developments meet the highest standards. This, in turn, boosts consumer confidence.
  • Developers: Developers leverage structural warranties to streamline their construction processes, ensuring efficiency and security, and ultimately earning consumer trust.
  • Self-Builders & Homeowners: Self-builders and homeowners can enjoy the reassurance and peace of mind that a structural warranty brings. It secures their investment, ensuring protection for years to come.

8. How Long Does A Structural Warranty Last?

You’ll find structural warranties offered in different timeframes, but a 10-year one is a popular choice. It gives you extensive coverage for a long period, giving you peace of mind that any issues will be taken care of down the road. Some warranties provide even more coverage during the initial years, and they could ask for periodic inspections to keep the warranty active.

9. Do I Need A Structural Warranty?

While a structural warranty isn’t mandatory, it can be a game-changer on a building that’s undergone significant construction. Here are some scenarios where having a structural warranty makes a lot of sense:

  • Property Sale: Most lenders prefer to see some form of latent defects insurance when selling a property post-major construction work.
  •  New Builds: When it comes to new builds, there are inherent risks, and your standard household insurance often won’t cut it. That’s when a separate insurance policy comes into play.
  •  Self-Build Projects: If you’re using a self-build mortgage to finance your project, a structural warranty is frequently a requirement imposed by the lender.
  •  Architect’s Certificate: While you can opt for an architect’s certificate instead of a structural warranty, it usually covers the first six years rather than a full decade. Keep in mind that any issues need to be sorted through the architect’s professional indemnity insurance.

10. The Coverage of a Structural Warranty

A structural warranty encompasses a wide range of possible issues and expenses that might come up down the road. These can involve:

  • Cost of Rebuilding: Covers the cost of fully or partially rebuilding a property due to structural defects, including defects in design, materials, or workmanship.
  • Water Ingress: Addresses damages caused by water penetration due to design, construction, or material issues.
  • Drainage System: Includes issues related to the drainage system constructed as part of the building project.
  • Insolvency of the Developer: Coverage for insolvency of the developer (if requested at the quotation stage).
  • Defects Insurance: Covers a period of 24 months following practical completion.
  • Structural Insurance: Extends beyond 24 months following practical completion.
  • Alternative Accommodation: Covers the cost of providing alternative accommodation while repairs are being conducted.
  • Contaminated Land Cover: Addresses expenses related to remediating contaminated land.
  • Professional Fees: Covers expenses associated with professional fees.
  • Removal of Building Debris: Addresses expenses related to the removal of debris.

11. The Bottom Line

A structural warranty serves as more than just insurance; it acts as a safety net, assuring the stability of a building and providing peace of mind to both builders and property owners. While it’s not a legal requirement, it’s a sensible choice, especially when dealing with property transactions, new construction, or significant building projects.

So, whether you’re a builder gearing up for a new project or a property owner keen on safeguarding your investment, it’s worth recognizing the value of a structural warranty to ensure long-term security and that all-important peace of mind.

If you’re getting ready to start a renovation or construction project, it’s a good idea to reach out to Compariqo. Our team is here to assist you with structural warranties and latent defect insurance.

We know every project is unique, and there’s no one-size-fits-all solution. That’s why we go the extra mile to ensure you get the perfect coverage at each stage of your project. Contact Compariqo today, and we’ll make sure you’re well-protected from start to finish.

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