Guide
What to ask a latent defects provider before you commit
Updated
You will buy this once and rely on it for a decade, quite possibly after selling the building to somebody you have never met. The questions below all have short answers, and every one of them decides something that surfaces years after the premium is forgotten.
On the sum insured
Is it the reinstatement cost of the building or the sale value of the units? They are different numbers and it is the first thing to establish, because underinsurance is applied at claim rather than at inception.
Then ask whether the sum insured is indexed. A figure fixed at completion is worth materially less in year nine, which is exactly when a structural defect tends to appear.
On the period
Does the cover run from practical completion or from first occupation, and what is the period? Ten to twelve years is typical in this market but the exact term is a policy term rather than a standard.
For a phased development, ask how the period applies across phases completed at different times.
On what triggers a claim
Does the policy require physical damage, or does it respond to a defect discovered before any damage occurs? Most respond to damage, and that distinction explains most of the disappointment in this class.
Then ask what the excess is and whether it applies per unit or per event. On a block of flats those are very different exposures.
On who you are buying from
Check the broker and the provider on the FCA's Financial Services Register before paying anything. You are entering a relationship intended to outlast the building work by a decade, so the identity and standing of the counterparty matter more here than on an annual policy.
Ask who the risk actually sits with, because the brand on the certificate and the insurer carrying the risk are not always the same, and it is the second that will be paying in year nine.