Built to last: How LDI is set to change the construction industry
The catastrophic defects of Mascot Towers and Opal Towers in Sydney made national headlines. Severely damaging consumer confidence in high-rise residential apartments.
To alleviate fear and offer assurance to protect potential buyers and investors, property developers are increasingly choosing to secure Latent Defects Insurance (LDI) for their new construction projects.
LDI provides developers and owners of new properties 10 years of insurance protection and has been designed to cover the cost of repairing, replacing, and reinforcing the insured structure, where an inherent defect is detected within the insurance period.
For property developers, including that you have a LDI policy in place as part of your promotional material can help accelerate sales, making your building a more attractive prospect to both owners and investors.
LDI Overview
- Development types: Class 2 apartments of all sizes
- Commercial and Industrial Developments - Classes 3-9. This may incorporate industrial and retail complexes, factories, hospitals, schools, and residential care facilities.
- Development value: The minimum limit of indemnity for Class 1 buildings is $2 million and $10 million for Class 2. A maximum standard limit of indemnity is $50 million, (higher values can be covered on application).
- Cover period: 10 years from the completion of the insured building work.
Latent defects, which can often occur several years after the completion of a project, significant financial burdens on developers, stress for buyers, and potentially lead to legal disputes. With its 10 years of cover, LDI plays a key role in risk management for the development industry. It helps protect both developers and buyers from the financial consequences of rectifying issues, ensuring a project remains financially viable.
Benefiting Builders and Buyers
A 2022 McCrindle Report commissioned by the NSW Government to measure buyer confidence found:
- 30% of consumers were confident purchasing medium to high-density property.
- 64% were concerned about defects.
- 74% of potential buyers were more confident with a LDI policy in place.
- 49% were prepared to pay more for a property with LDI in place.
Your LDI Policy also typically provides cover for Temporary Accommodation, Removal of Devris, Waterproofing, Professional Fees and Reinstatement costs, up to the policy limits.
Although as the developer you initially purchase LDI, the policy is transferred to the owner's corporation at practical completion. This provides direct access to the isurance product for lot owners.
How Coverforce can help
Coverforce Insurance Brokers in Sydney is a designated insurance brokers for this new product. We can work with your business to assist your clients.
Our specialist team can provide you with in-depth information, personalised advice, and insights about LDI, or provide an obligation-free indicative quote for your new project. For more information, please reach out to Andrew at andrew_ferguson@coverforce.com.au or 0412 511 994.
Find out more: Latent Defects Insurance.
The information provided in this article is of a general nature only and has been prepared without taking into account your individual objectives, financial situation or needs. If you require advice that is tailored to your specific business or individual circumstances, please contact Coverforce directly.
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