Insurance Backed Guarantees: Why Every Homeowner Needs One

November 19, 2024

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Discovering defects in your home several years after purchasing and moving in can cause concern and stress.

Whether it’s large cracks appearing on walls and ceilings or major problems with your windows, roofing or piping, how are you meant to cover the costly repairs?

Fortunately, this is why many homeowners have a structural warranty of some kind – be it a new-build warranty, a self-build warranty or just a standard 10-year structural warranty – to hold someone accountable for poor workmanship, materials or design.

If you already have one of these, why would you also need an Insurance Backed Guarantee (IBG), though? They’re quite important for homeowners to cover themselves financially.

Not sure what they are and how they work? Continue reading to find out.

What is an Insurance Backed Guarantee and what is covered?

what-is-an-insurance-backed-guarantee-and-what-is-covered

An Insurance Backed Guarantee underwrites your warranty provider’s written guarantee and is used for faulty workmanship and poor materials.

It’s incredibly useful for protecting a homeowner, financially, in the case that the contractor or developer that built their home has ceased to trade.

Not all Insurance Backed Guarantees are the same. The level of coverage depends on the type of policy you have.

Generally, the following can be covered by an IBG:

Guarantee period

The guarantee period of your IBG depends on the type of work you have done. This will be explained on your certificate of insurance.

Your guarantee period can range anywhere from one year to 10 years or more. This period comes into effect on the date your contract is completed, and all money has been paid.

Deposit protection

If you have paid your deposit and the developer has gone out of business before construction has started on your property, you can use the Insurance Backed Guarantee to recover your deposit up to a maximum of £10,000 or 25% of the contract value (depending on your policy).

Deposit protection usually lasts up to 120 days from the point when the payment has been made. It becomes void once construction starts.

Why obtain an Insurance Backed Guarantee?

The main reason you should obtain an Insurance Backed Guarantee is to protect your finances.

Should your home reveal a latent defect several months or years after moving in, and your contractor or developer now ceases to trade – for any reason – you will not be able to hold them liable for their poor workmanship or low-quality materials they used during construction.

Who foots the bill in this instance? You.

With an Insurance Backed Guarantee, you’ll still be protected even if the company that constructed your home disappears, ensuring you’re not left out of pocket.

Thousands of businesses close each year because of liquidation, bankruptcy or the owner’s death. An IBG will still protect you and your property in this circumstance, so you don’t have to pay huge repair costs for latent defects.

Common applications of IBGs

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Piled foundations

In properties with piled foundations, an Insurance Backed Guarantee protects homeowners from the financial burden of repairing settlement issues.

Flat roof installation

IBGs are often used to support an installer’s guarantee for flat roof installations. Should the unfortunate circumstance occur where the installer is unable to correct any issues as a result of poor workmanship or materials, the IBG will cover the cost of repairs.

Double glazing installation

An IBG may be a legal requirement alongside the installation of double glazing. This may depend on whether the contractor will self-certify their work with a Competent Person Scheme.

Summary

With so many contracting and building firms going out of business – either through bankruptcy or liquidation – each year, it’s essential that you cover yourself with an Insurance Backed Guarantee.

If you don’t have one and find latent defects, but the contractors who built your home no longer exist, you will have to foot the bill – which could cost you thousands.

Author Profile

Manuela WillboldOnline Media & PR Strategist

Senior Online Media & PR Strategist at ClickDo Ltd. | Editor in Chief at LBN | Summer Course Student at the London School of Journalism and passionate Digitalist.