Home warranty insurance: when your builder must have it
When does a builder need home warranty insurance in Australia?
It depends on the state. In NSW it is required for residential building work over $20,000 under the Home Building Compensation scheme. In Victoria, domestic building insurance is required for work of $16,000 or more. In Queensland, most residential work over $3,300 must be covered by the Queensland Home Warranty Scheme. In Western Australia, home indemnity insurance is required for work over $20,000.
Home warranty insurance is the cover that protects you, not the builder. If your builder dies, disappears or goes insolvent part way through the job, or will not fix defects, it is what pays for someone else to finish or repair the work.
Above a set contract price it is compulsory, and in most states the builder must have it in place before they can take any money from you. The name and the threshold change from state to state.
The thresholds, state by state
- New South Wales: Home Building Compensation insurance for residential work over $20,000. The builder must give you the certificate before you are asked to pay.
- Victoria: domestic building insurance for work of $16,000 or more. The builder must have a policy before taking a deposit and give you the certificate within seven days.
- Queensland: the Queensland Home Warranty Scheme covers most residential work over $3,300. The premium is included in the contract price and paid to the QBCC by the contractor.
- Western Australia: home indemnity insurance for work over $20,000. A builder cannot take a deposit until they have given you the certificate.
What it covers, and what it does not
In most states it is last-resort cover: it pays out when the builder cannot, because they have died, disappeared or become insolvent, rather than whenever something goes wrong. Queensland's scheme is broader and can also respond to defects the contractor will not fix.
It is not public liability insurance, which covers damage and injury during the work, and it is not a guarantee of quality. It is protection against being left with a half-finished house and nobody to finish it.
What to ask for
Ask for the certificate of insurance itself, and check three things on it: that it names your address, that it names the builder you are contracting with, and that the contract price on it matches yours.
A builder who says they will sort the insurance out later, or who wants a deposit first, is asking you to take a risk the law was written to stop you taking.