Collateral Warranties vs Structural Warranties – is there a difference?
Collateral warranties and structural warranties (also known as Latent Defects insurance) may sound similar, but there are some crucial differences any developer and future property owner need to be made aware of. One Guarantee have put together a quick guide, highlighting the key differences between the two.
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 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.
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 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, cover will also seize 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.
Generally Collateral Warranties restrict the owner’s ability to assign the warranty meaning that it will not automatically be transferred to the new owner.
Unlike collateral warranties, One Guarantee’s structural warranty insurance is fully assignable for an unlimited number of times throughout the lifetime of the policy. One Guarantee offer cover for a period of up to 12 years.
One Guarantee provide 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. To find out more, visit www.oneguarantee.co.uk or phone 01603 218288 to speak to a member of our team today.