Faced with £1,600-plus bill for faulty rendering … but the insurance company wouldn’t pay.

The builder went bust before fixing the problem, but our policy covered that eventuality

We built a £49,000 annexe three years ago. Last year we found some bubbling in the external render, which the builder agreed to treat.

There were various delays due to weather and cancelled appointments and then we received notice that the firm was in liquidation. Fortunately, the deal included “a guarantee in the event of the builder ceasing trading”, so we sent a claim to the insurers but they’ve said that because the fault was identified before the builder ceased trading, it isn’t covered. We’ve been quoted £1,600 plus VAT to repair that wall – though the builder warned the other three are likely to have the same problemJL, Birmingham

Yours is a grimly familiar story – reassuring promises from the sales blurb and a nasty sting in the small print. The guarantee was provided by IWA which says it does not cover faults arising before a trader ceases trading. “The scheme has terms and conditions which are made quite clear and a ‘key facts sheet’ is sent with every policy,” it says.

However, these make no mention of this crucial caveat, merely stating remedial works will be covered if the supplier ceases trading.

The exemption is detailed half-way down the terms and conditions. This could be your only hope.

The Financial Services Ombudsman confirms that guarantee protection policies like this one do not normally cover works that the supplier does not get round to completing before going out of business, but that this should be made clear to customers.

You should refer your paperwork to the Ombudsman who will decide whether the “key facts sheet” should have highlighted this. If they find that it was not made clear enough it might award compensation.

If you need help email Anna Tims at your.problems@observer.co.uk or write to Your Problems, The Observer, Kings Place, 90 York Way, London N1 9GU. Include an address and phone number. Submission and publication are subject to our terms and conditions