Structural Warranties vs Collateral Warranties – is there a Difference?

Structural warranties (also known as Latent Defects Insurance) and collateral warranties may sound similar, but there are some crucial differences that developers and future property owners should be aware of. We’ve put together a quick guide, highlighting the key differences between the two.

Negligence

Collateral warranties require negligence of the liable third party to be proven in a court of law – this can often be a difficult, lengthy and very costly process. The negligent parties are often unwilling to accept fault; particularly if the structural defect is significant.

One Guarantee’s Latent Defects Insurance (structural warranty) will pay out regardless of who’s at fault, provided the structural defect constitutes a valid claim under the policy. Our cover prevents any increased costs and unnecessary delays.

Insolvency

Should the unfortunate scenario arise where the liable party goes into forced or voluntary insolvency post-completion, any rectification costs will need to be met by the owner under a collateral warranty arrangement.

Under a structural warranty, however, insolvency is not an issue and the insurer will meet any rectification costs regardless of the responsible party’s solvency and ability to rectify the defect.

Professional Indemnity Insurance

It is important to note that under a collateral warranty, adequate limits of Professional Indemnity (PI) Insurance need to be maintained. Not only is PI Insurance invalid in the event of insolvency, but cover will also cease if PI is not renewed, leaving the property owner with no right of recourse in the event of a defect.

Structural warranties do not require Professional Indemnity insurance to be in place. If the structural defect is covered under the policy, the policy will respond.

Assignability

Generally, collateral warranties restrict the owner’s ability to assign the warranty, which means that it will not automatically be transferred to the new owner.

Unlike collateral warranties, One Guarantee’s structural warranties can be assigned an unlimited number of times throughout the lifetime of the policy. One Guarantee offers cover for a period of up to 12 years.

Speak to us about Structural Warranties Today

One Guarantee provides structural warranty insurance for commercial and residential properties throughout the UK. Our warranties provide financial security and peace of mind should any structural defects come to light. Call us on 01603 218288 or email us.

You may also be interested in reading: What Is The Difference Between A Structural Warranty And Consumer Code Protection?