Protecting your building project with a structural warranty
This article will help you to understand how to protect yourself, get the right cover in place for your building investment and what your need to know about structural warranty providers.
What is the purpose of a Structural Warranty?
You will need a structural warranty to gain protection against any fundamental structural problems with the building, typically for up to 10 years. Mortgage lenders will insist on a warranty, but even if you are funding your build with cash, it’s still a standard requirement to have one, so any future sales of the property aren't jeopardised.
Structural Warranty Policy Small Print
Before signing on the dotted line take a look at the provider’s restrictions which are usually within the small print.
Typical exclusions from a structural warranty include:
Anything not considered to be a major damage defect, such as shrinkage cracks to walls and ceilings, or damp from internal environmental conditions.
Problems arising through a lack of appropriate maintenance or works commenced/modified after initial occupation.
Some external works, for instance, steps and paving.
Any contractual disputes you have with builders.
Accidental or storm damage, which would be covered by buildings insurance.
If any structural issues or major damage do arise in the first couple of years post-completion, the underwriter will usually refer you back to your builder to remedy the problem. However, if your builder has gone out of business or isn’t being responsive, then the underwriter will step in for qualifying claims. In years three to 10, the policy will automatically provide cover, with no complications relating to the original contractors.
How much does a structural warranty cost?
As a rule of thumb, it’s usually a good idea to budget 1% of your indicative build costs. This will be payable ahead of any work whatsoever occurring on site. A retrospective structural warranty is much harder to get, so any decisions around insurance should be made right at the beginning of your project.
How do I choose a structural warranty provider?
When you build a new property, it’s crucial you ensure it has a New Home Warranty in place so you can sell it easily and protect the buyer. But with a range of warranty providers in the market, how do you know who to choose? It’s simple – always go for an 'A' rated provider, or you risk choosing an unstable company that could leave you uninsured.
In the event of a claim, it’s your insurer who is responsible for paying – so you need to be confident that they can. An 'A' rated insurance company has been and will continue to be, assessed by leading international rating agencies such as A.M Best, Fitch, Moody’s, and Standard & Poor’s (S&P).
These agencies carry out a thorough assessment of the insurer's long-term financial strength and its subsequent ability to pay valid claims.
A lower-rated insurer, such as a ‘B’ or ‘C’, is deemed to have a poorer ability to settle claims.
Unrated insurers, on the other hand, do not qualify for a financial strength rating by these agencies, meaning there is no evidence of their ability to pay claims and their long-term stability has not been independently verified by these industry-standard companies.
Also, for unrated insurers based outside of the UK, their local regulatory bodies may not also subject their insurers to the same rigors that the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) do in the UK. Many are also not part of the Financial Services Compensation Scheme (FSCS) which can provide some protection to homebuyers if the insurer goes into liquidation.
For more information on any of our structural warranty insurance policies, explore our products here: https://www.build-zone.com/structural-warranty