Strata Insurance vs Latent Defects Insurance: Closing the coverage gaps for property stakeholders
For property stakeholders - whether owners, investors, builders or developers - ensuring comprehensive protection against potential risks is crucial.
Strata insurance and Resilience LDI play essential roles in safeguarding property investments but understanding the critical distinctions between them is necessary to avoid coverage gaps that can lead to financial stress and lengthy litigation.
Strata Insurance: Essential but Limited Coverage
Strata insurance is specifically designed for strata-titled properties, covering shared spaces like lobbies, stairwells, walls, floors, and ceilings. It protects against incidents such as fire, water ingress, accidental damage, and public liability, ensuring that common areas can be repaired or rebuilt in the event of a covered loss.
However, strata insurance doesn’t cover (amongst other things) structural issues stemming from construction flaws. This is where latent defects insurance (LDI) becomes crucial, providing coverage that strata insurance alone cannot offer.
Resilience LDI: Addressing Structural Risks
Resilience LDI, also known as structural defects insurance, offers protection for structural issues that may surface after construction is complete. These hidden defects, which may not be immediately visible, can emerge over time, leading to serious safety concerns, costly repairs, and complex legal disputes. Resilience LDI helps cover the expense of fixing these defects, sparing property stakeholders from significant financial and legal burdens.
The Consequences of Coverage Gaps: Real-World Examples
The costly impact of not having Resilience LDI is evident in Australia’s high-profile cases like Opal Tower and Mascot Towers. While both Opal Tower and Mascot Towers had strata insurance, which would have provided assistance for immediate risks like fire or storm damage, the absence of Resilience LDI left owners with mounting repair bills and protracted legal battles.
When structural defects surfaced at Opal Tower, residents were evacuated over concerns about the building’s integrity. Strata insurance covered some of their short-term costs, but the deeper structural issues required more comprehensive coverage - exactly what Resilience LDI would have provided.
Similarly, Mascot Towers faced structural issues that led to prolonged evacuations, forcing owners to navigate both the financial burdens and extensive legal processes to address the defects.
Read more: What would have happened if Mascot Towers had Resilience Latent Defects Insurance
Avoiding Financial and Legal Stress: The Need for Both Insurance Types
For a comprehensive approach, property stakeholders should consider combining strata insurance for common area protection with Resilience LDI for structural integrity on new builds. This dual approach provides robust coverage, helping to avoid expensive repairs and minimising the risk of drawn-out legal disputes. Understanding the distinctions between strata and Resilience LDI empowers stakeholders to make informed decisions that protect investments from unforeseen risks, costly repairs, and lengthy litigation.
Joel Robinson
Joel Robinson is the Editor in Chief at Apartments.com.au, where he leads the editorial team and oversees the country’s most comprehensive news coverage dedicated to the off the plan property market. With more than a decade of experience in residential real estate journalism, Joel brings deep insight into Australia’s evolving development landscape.
He holds a degree in Business Management with a major in Journalism from Leeds Beckett University in the UK, and has developed a particular expertise in off the plan apartment space. Joel’s editorial lens spans the full lifecycle of a project—from site acquisition and planning approvals through to new launches, construction completions, and final sell-out—delivering trusted, buyer-focused content that supports informed decision-making across the property journey
