16 July 2025

Why Commercial Latent Defects Insurance is a must-have for modern developments

By Build Zone
Commercial Latent Defects Insurance

As commercial property projects increase in scale and complexity, so do the risks associated with design and construction flaws. Commercial Latent Defects Insurance has become an essential safeguard for developers, investors and funders looking to protect the long-term value of their assets.

Traditionally, commercial developments relied on collateral warranties and professional indemnity (PI) insurance. However, rising contractor insolvencies and more cautious funders have revealed their limitations. Latent defects insurance offers a reliable, no-fault alternative that is rapidly becoming standard practice. 

What Is Commercial Latent Defects Insurance?

Commercial Latent Defects Insurance provides cover for hidden structural defects caused by poor design, workmanship or materials. It is a first-party insurance policy, meaning the insured can claim directly without having to prove liability or pursue lengthy legal action.

Cover typically lasts for 10 or 12 years from practical completion and includes structural elements such as foundations, floors, walls, roofs and waterproofing. The policy ensures that if something goes wrong after completion, especially when a contractor is no longer trading, you have a clear route to compensation. 

Why it’s becoming essential

More stakeholders across the property industry are recognising the importance of commercial latent defects insurance. Here’s why:

  • Contractor insolvencies are on the rise. If a member of your build team goes under, their PI cover likely ends with them, making recovery through legal channels almost impossible.
  • Tenants and purchasers increasingly require proof of latent defects cover before signing contracts.
  • Funders and investors view it as a sign of responsible risk management, often making it a precondition for finance.

As a result, developers are now using these policies not just for protection, but as a way to improve asset value and exit strategies. 

What’s covered?

Build-Zone’s Commercial Latent Defects Insurance policies protect against:

  • Structural issues due to design faults, poor workmanship or defective materials
  • Failures in the waterproof envelope
  • Optional extras like Loss of Rent Insurance, which covers income lost due to a covered defect
  • Machinery Inherent Defects Insurance (MIDI), which covers latent faults in systems such as HVAC, lifts and electrical installations.

Policies can also be assigned to future owners, adding long-term value and peace of mind.

Suitable for a wide range of developments

Whether it’s a high-rise office, student accommodation scheme, shopping centre, hotel or logistics hub, Build-Zone offers tailored cover for all types of commercial builds. Conversions and renovations are also eligible, provided quality control can be verified.

Projects across the UK and Ireland are supported, and sector experience includes:

  • Offices
  • Retail and shopping centres
  • Hotels and leisure facilities
  • Build-to-Rent schemes
  • Mixed-use schemes
  • PBSA (Purpose-Built Student Accommodation)
  • Warehousing and logistics. 

Why Choose Build-Zone?

With over 150 years of underwriting expertise, Build-Zone provides trusted, flexible policies backed by ‘A’ Rated insurers. Their in-house auditing service, Build-Zone Survey Services (BZSS), ensures construction quality from start to finish.

Although the best time to engage is before works begin, Build-Zone can also cover projects already underway, or even fully completed, following inspection.

Commercial latent defects insurance is no longer a ‘nice to have’, it’s a crucial part of a robust development strategy. It protects your investment, reassures stakeholders and simplifies the claims process when things go wrong.

With Build-Zone, you gain access to industry-leading cover, expert technical support and flexible terms designed to meet the unique needs of your project. It’s one of the most innovative ways to futureproof your commercial property development.

Related Articles

What Does a Building or Structural Warranty Cover?

A Guide to Latent Defects Insurance

What’s the difference between a Structural Warranty and an Architect Certificate?

 

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