Self-build Warranties and Site Insurance

What Exactly is a Warranty?

It’s a specialised insurance product that covers the first few years in the life of a new house. In many ways, it’s similar to the guarantee you might get when you buy a new car or an appliance. If there is something fundamentally wrong with your house – walls cracking, penetrating damp, drains not working properly – the warranty provider will fix it instead of you having to chase up builders, engineers or architects. Technically, it’s known as ‘latent defects insurance’. The warranty provider will check your plans (known as a technical audit) and inspect the house whilst under construction.

Isn’t This All Covered By Regular Building Inspections?

In theory, yes. In practice, the two systems of inspection operate side by side and are concerned with slightly different areas. Besides, if things go wrong, you can’t make a claim against your building inspector. Local authority building inspectors have recently begun to offer their own warranty scheme (see LABC), but it’s administered independently and uses different inspectors.

How Long Does Cover Last?

Usually for ten years. And some warranties provide more cover in years one and two than they do in subsequent years. A warranty is almost invariably charged as a single premium and costs vary from £1,000 up to £5,000, depending on the size and complexity of the project.

Why Doesn’t Household Insurance Cover These Risks?

New homes present some significant risks which usually appear in the first two years after completion, and a warranty is the normal method of covering these risks.

Do I Have to Have One?

It’s not compulsory, but most lenders will require one, and you may have trouble selling a house less than ten years old if you don’t have a warranty in place. Some people choose to build with an architect’s certificate instead of a warranty — here, the architect certifies that the work has been properly designed and carried out correctly, and provides insurance cover using their own indemnity insurance. But if there is a fault, the self-builder then needs to sue their architect, which is expensive and unpleasant. In contrast, a warranty provider deals with the problem like a normal insurance claim.

An Architect's Guarantee

Some self-builders opt for an architect’s certificate over a warranty, which is a signed statement confirming that the house has been supervised during the build period and constructed in accordance with accepted building practices. It’s cheaper than a warranty, in the region of £1,000, but is only valid for six years and is not an insurance policy, meaning if something goes wrong, you would have to prove negligence and claim against the architect’s professional indemnity insurance. It also doesn’t provide any cover for the insolvency of the builder. An increasing number of lenders are asking for a full structural warranty to be in place before releasing funds.

Who Sells Warranties?

It’s a small, specialised market and the big household insurers won’t be much help, but nevertheless there are enough providers for the market to be quite competitive:

• NHBC (National House Builders Council — search on NHBC Solo)
• Premier Guarantee
• LABC (Local Authority Building Control)
• Self-build Zone
• BLP (Building Life Plans)

How Do They Compare?

The NHBC is the best known and longest established name, and it writes over 50% of the self-build warranties via its dedicated Solo policy. It helpfully publishes its fees online (£2,059 for small houses, up to £3,363) and it also uniquely offers structural cover on buildings before completion — with other policies you will have to claim on site insurances or take up matters directly with builders and/or engineers. The NHBC has its own set of standards distinct from the Building Regulations, and you will be expected to meet these standards, which may be restrictive for you if you want to use unusual methods or materials.

The other providers tend to offer a little more flexibility than the NHBC, and often compete favourably on price. They often work hand in hand with private building inspectors and offer a range of services over and above warranties and site inspections, such as site insurances, air-pressure testing and SAP calculations. Self-build Zone in particular has set itself up as a one-stop shop for dealing with much of the red tape bedevilling the typical self-build project. BLP tends to specialise in larger projects, especially where there are unusual features or modern methods of construction.

There are also brokers, such as Evolution Insurance (0845 459 7185), who specialise in the home warranty market and will search out the best deal for you.

What if I Want to Sell My Self-build with No Warranty?

As lenders have tightened their criteria, this is becoming a more common occurrence. In order to sell, you will need a retrospective warranty. It’s not something the NHBC does, but the other insurers will consider it, albeit at a greater cost.

What is Covered? What isn’t?

Generally the cover is quite limited: latent defects insurance is really just concerned with major faults in the design or construction of a house, such as subsidence, drain problems or rain penetration. Snagging defects such as sticking doors or creaking floors are usually excluded. It’s well worth checking the small print to see what’s covered and what’s not: items like double-glazing failure and roof tile damage are optional. And, of course, as a rule, the wider the cover, the more expensive the policy. 

Is There Anything Else I Need to Know?

Self-build warranties often come with a ‘lock-in’ of one or two years which restricts the transfer of the warranty to a new owner. For most self-builders, this is not a problem, but it can cause an issue when circumstances change (typically death or divorce). In exceptional cases, the warranty providers have the power to relax the lock-in. Check before you sign up.

Site insurance - Why You Need It

Quite distinct from both building inspections and warranties, site insurance looks to cover the risks from the building process itself. It’s analogous to having buildings insurance on a completed house. Site insurance covers you for accidents on site to people working or visiting. It may also cover for fire damage or theft, depending on the clauses and the exclusions. Whereas a warranty is based on a one-off payment with the cover period lasting ten years, site insurance tends to last no more than 24 months, and then morphs into regular building and contents insurance, renewable on an annual basis.

It’s hardly surprising that self-builders find this tangled web of inspections, warranties and insurances confusing. We’ve got here by dint of historical accident: a more rational approach would combine both sets of inspections with both insurance products, all administered by one body. Some of the self-build brokers, such as Selfbuild Zone and BuildStore, are moving to make things much more transparent and easier to understand, but we are still a long way from integrating the three strands into one product.