What is home indemnity insurance?
Home indemnity insurance is a type of insurance designed to protect homeowners against the risk of financial loss if the builder cannot complete the work or meet a valid claim for faulty or unsatisfactory building work because of a ‘relevant circumstance’ exists in relation to the builder.
It is usually required for new construction, and may be required for renovations depending on the value of the work being done.
What does home indemnity insurance cover you for?
Home indemnity insurance provides protection to owners against the risk of:
Losing a deposit up to the value of $40,000; or
Up to a limit of $200,000; or
The value of the contract work, whichever is lower
If the builder cannot complete the work or meet a valid claim for faulty or unsatisfactory building work because of a ‘relevant circumstance’ exists in relation to the builder.
A relevant circumstance can occur if the builder:
Dies, disappears or becomes insolvent; or
The builder is not an individual, such as a corporation, and the builder ceases to exist or becomes insolvent.
Is home indemnity insurance mandatory?
Home indemnity insurance is required for residential building work over $20,000.
Residential building work being:
construction of a new dwelling;
extension or renovation of an existing dwelling;
placing a dwelling on land; or
construction, extension or renovation of multi unit grouped homes except for some multi-storey developments and fully leased retirement villages.
Builders
It is the builder's responsibility to take out home indemnity insurance on behalf of the owner, before:
Starting any residential building work
Asking the homeowner to pay a deposit, or asking the homeowner to pay any other money under a residential building contract.
The builder pays the insurance premium which is a one-off payment. To ensure that the work is covered, builders need to factor the cost of the insurance policy into the contract price and apply to the insurer for coverage.
The policy will be registered in the name of the owner, so if the residence is sold within the six year insurance period, the benefit of the policy will be passed on to the subsequent owner(s).
Home owners
Before making any payment of a deposit, owners should be aware that the builder must provide them with a copy of the “Notice for the Home Owner” which summarises the main requirements of the Home Building Contracts Act 1991 and the requirement to obtain home indemnity insurance.
The builder must also provide a copy of the home indemnity insurance certificate to the owners.
We hope this helped in answering your questions when it comes to home indemnity insurance. If you require any further information please contact Building and Energy on 1300 489 099