Brian Kilroy is a business development manager at BLP Insurance
First of all, before anyone reads the term ‘cover’ and thinks “this isn’t for me” then let me stop you there. There is a major misconception around these products as not only are these types of products mandatory for those buying a new build home, or even building a new home themselves, but mortgage providers will not lend without it. Therefore, it is essential to know which product best suits you and your needs.
In general terms, both warranties and insurance on properties and their structural components offer a ten year policy which transfers from owner to owner, and covers both new builds and conversions. What is worrying, and why I want to raise the profile of this type of cover, is that in 99% of cases it is the housebuilder who decides which warranty/insurance product comes with the property and not the purchaser. As a result of this I have seen many cases where the developer makes their choice of cover based on the impact on them as builders and not the implication for the purchaser as the owner of the property.
There are two types of cover: Warranty and Insurance. Simply put, a warranty promises that the manufacturer will fix a fault with a malfunctioning product. Whilst an insurance policy promises that the insurer will pay to have that fault fixed.
Warranties, in general, solely rely on proving negligence. This is the crucial aspect which causes severe delays whilst parties argue over who is to blame. They are also riddled with conditions and limitations that are very rarely communicated to by the housebuilder or even the conveyancing solicitor.
Limits can include the extent of cover, which can even include the maximum amount of money payable, which in many cases is less than the value of the house. Whilst conditions may stipulate that some policies require that the buyer cannot sell the property for a specified period. What is more, the cover "changes" over the 10 year period; what's covered in the first couple of years may not be covered for the remainder. It is due to these seemingly endless limits and conditions that warranty claims are often a lengthy and arduous process and take a long time to be resolved.
An insurance policy, however, covers the building, rather than the builder, and relies solely on proving damage rather than who is to blame. Who is to blame can be dealt with afterwards. The main factor pushing insurance, is that it has no limits or onerous conditions, rather it is exceptionally straightforward. This then becomes apparent when something goes wrong, as the lack of limitations and conditions makes it far more responsive.
Unlike traditional new homes warranties, BLP Insurance does not require developers to pay up front registration fees, ongoing membership fees, bonds, guarantees or, more importantly, extortionately high security deposits. For claims, only proof of damage is required not proof of liability meaning that if your builder has long since disappeared, you are not left exposed and your home is still covered. Many lenders will now also insist that your home is protected by some sort of insurance and BLP Insurance is accepted by all major UK mortgage lenders.
When choosing which cover to go for you must consider which product would give the best protection if something were to go wrong with the property or development. But, regardless of the product, this type of cover is mandatory for those building a new home and you shouldn’t build without it.