Latent Defect

What Does Latent Defect Mean?

A latent defect refers to a flaw in a product that becomes apparent only after the time of purchase. In the context of real estate, a latent defect in a property may not be detected even with a thorough inspection prior to the sale. In insurance, a latent defect is often listed as an exclusion in property insurance policies.

Insuranceopedia Explains Latent Defect

A latent defect that results in a loss is typically not covered by insurance and is considered an exclusion. Homeowners often don’t find out about these gaps until they file a claim, which puts latent defects in the same category as a number of other areas not protected by most homeowners insurance. However, if an external factor triggers the latent defect to cause a loss, the exclusion may be disregarded. For example, cracked concrete floors due to poor-quality materials would not be covered by insurance. However, if faulty electrical wiring causes a fire, leading to significant property damage, the insurance might cover the resulting damage. That distinction is the main reason how homeowners insurance treats fire damage matters even when the underlying issue started somewhere else in the house.