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. 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.