Latent defects insurance
Available to cover new homes, renovations and extensions, apartment buildings, offices and commercial developments.
Enjoy peace of mind with the right latent defects insurance policy
Latent defects insurance provides long-term protection if an unexpected structural issue arises after practical completion. It’s designed to safeguard owner builders, residential and commercial builders, developers and Bodies Corporate, covering everything from new homes and renovations to residential apartment buildings, offices and commercial complexes.
When you partner with Ian Jones, you’re supported by an experienced team of insurance brokers who understand the nuances of the Australian market. We work closely with Lloyds to secure practical, cost-effective coverage tailored to your project. In turn, you can enjoy confidence in your build long after the keys are handed over.
Why latent defect insurance is crucial for new buildings
Recent high-profile cases involving serious building defects have shown just how costly unforeseen structural issues can be. When defects emerge after the construction process has finished, they can significantly impact both the liveability and long-term value of a completed building.
Under Australian consumer law, builders remain liable for structural defects under an implied warranty for up to 10 years. However, this can create uncertainty if a defect arises and the builder is unable to meet that obligation.
Latent defect insurance is designed to protect clients against physical damage or destruction of property caused by an inherent defect in critical building elements, including waterproofing and weatherproofing. With a 10-year policy in place, property developers, homeowners, and residential and commercial builders can protect their investment.
Discover the benefits of latent defects insurance with Lloyds
Resolve issues faster and with less disruption. Latent defects insurance backed by Lloyd’s of London provides certainty when it matters most. With a Lloyd’s policy in place, property owners can claim directly with the insurer as soon as a covered defect is identified, without needing to prove fault or engage in costly legal action.
- 10-year non-cancellable policy.
- Transferrable to future property owners.
- Owner developer builder protected.
- Insurer (Lloyds) fixes the defect.
- No delays over remedial work.
- NNo delays over whose fault.
- No doubt about Lloyd’s ability to pay.
- Asset protection.
- Avoid delays due to litigation.
- Increase Asset value by having insurance protection.
- Where rights of recovery exist, they are at the insurers’ expense, not the owner’s or builder’s.
Frequently Asked Questions
Also known as structural defects insurance, latent defects insurance (LDI) is a 10-year, first-resort insurance policy that protects a completed building against hidden structural defects. It covers physical loss or damage caused by faults in design, materials or workmanship that only become apparent after construction is finished.
This type of coverage applies to the insured building’s structural elements and external envelope, making it particularly valuable for new residential, commercial and strata developments.
It protects developers, builders and future owners from long-term defect risks and costly remediation, providing certainty well beyond practical completion.
‘First resort’ means you can claim directly with the insurer as soon as a defect is identified, without having to prove fault or take legal action first. There is no need to pursue the builder, developer or consultants before the policy responds.
Because latent defects insurance operates on a strict liability basis, the insurer responds in the first instance to covered defects.
This helps prevent lengthy disputes, expert reports and legal proceedings, saving property owners significant time, stress and legal costs while ensuring defects are addressed quickly.
Latent defects insurance generally covers the cost of repairing, replacing or strengthening insured parts of the building when an inherent defect is discovered during the policy period.
Cover typically includes:
- Structural elements of the building
- The building envelope, including waterproofing
- Associated reinstatement costs
- Removal of debris
- Alternative accommodation where required
Importantly, it does not require a subrogation or legal claim to activate the policy. This means developers, builders, current and successive owners are protected from the financial burden and uncertainty usually associated with defect disputes.
A Technical Inspection Service (TIS) is an independent, third-party review of a building’s design and construction. A mandatory requirement for obtaining latent defects insurance, it focuses on high-risk areas such as structure, waterproofing and compliance with approved designs and Australian standards.
By identifying issues early, a TIS allows defects to be corrected during construction, when fixes are faster and far less costly. This helps developers and builders avoid expensive post-completion rectification, legal disputes and reputational damage.
This insurance significantly strengthens consumer protection, particularly for apartment and strata developments.
Once an Occupation Certificate is issued, the policy automatically transfers from the developer to the strata Body Corporate, and continues to transfer to future owners for the remainder of the 10-year term.
Without it, owners often face lengthy and expensive legal disputes to prove fault or negligence. If the developer no longer exists, owners may have little or no recourse and be forced to fund repairs themselves.
A 10-year latent defects insurance policy removes this risk, protecting and often enhancing the property’s resale value.
Latent defects insurance is typically taken out by the developer or builder for new residential, commercial or mixed-use projects.
While the policy is arranged during the construction phase, the benefit of the cover transfers to property owners at completion and continues through any subsequent ownership changes.
This makes it particularly valuable for:
- Property developers
- Residential and commercial builders
- Strata and Body Corporate developments
- Property buyers and subsequent owners
Latent defects insurance must be applied for before starting construction. This timing allows the insurer to conduct a Technical Inspection Survey, which reviews the design and construction methodology before work starts.
As the policy becomes active upon completion, it must be fully paid before the project is finished.
As a general guide, the premium for latent defects insurance is typically around 1.5% to 2% of the construction value. The final cost depends on factors such as the building type, project size, risk profile and scope of cover required.
The best way to determine the right cover and pricing for your project is to speak with a qualified insurance broker who specialises in latent defects insurance. Professional advice ensures the policy is structured correctly and provides meaningful protection for your build.