Home Builders Must Know These 5 Things About Insurance
If you are building a new home or renovating, you need to know about the right insurance to protect you from losses, damage, or shoddy work. It’s not uncommon to hear horror stories about unscrupulous builders who skip town or go bust. It’s a major cause of headache for homeowners who find themselves at a financial loss and an unfinished project to deal with.
Builders' warranty insurance is designed for these exact situations. It offers protection to the homeowners under circumstances when you encounter trouble with work done by the builder (or not done). This insurance is required when building a house and for renovations (depending on which state you are covered).
As a home builder, it is your responsibility to obtain this type of insurance. It gives your customers peace of mind knowing that they will be covered for defective work or failed completion of a project.
In case you are wondering if you need insurance, these are the five things you need to know to help you out.
1. Building Insurance is Different for Every State in Australia
Every home builder must secure insurance before getting work done. It is a must for every state in Australia, although the specific details on the coverage and circumstances wherein the insurance is effective will differ from one state to another.
In New South Wales and Queensland, it is known as a home building compensation fund. In Victoria, it is known as domestic building insurance.
The insurance schemes vary significantly, too. Queensland is known to offer the highest level of consumer protection because the government underwrites the warranty risk. For some other states, many would argue that getting compensation is simply unattainable.
2. Coverage of Builders Warranty Insurance
The extent of the coverage of the insurance will begin as soon as construction starts. Hence, builders are required to obtain this type of insurance prior to the start of construction.
The coverage of the insurance will take effect throughout the course of the build and may even extend years after the completion of the project. The actual length of the coverage will be determined upon the application for this insurance.
3. Builders Warranty Insurance is Mandatory in Australia (except for one state)
Homebuilders are mandated by the Australian government to obtain builders' warranty insurance when offering their service to homeowners. However, this is not mandatory in the state of Tasmania.
According to the Tasmanian government, this type of insurance did not offer enough value for money to homeowners. The extreme circumstances that enable homeowners to file a claim include the following:
- Death of the builder
- Unexplained disappearance
4. Insurance is Required Based on a Minimum Value of Project
In order for home builders to be required to obtain insurance, the project must equal or exceed the state-mandated minimum value.
Insurance brokers for home builders
Here is a breakdown of the data for each state in Australia (data obtained from the respective state’s official government websites):
- Australian Capital Territory – The minimum value of a project to require insurance is $20,000 with coverage for 6 years after project completion.
- New South Wales – The minimum value of a project to require insurance is $20,000 with coverage for 6 years after project completion.
- Northern Territory – The minimum value of a project to require insurance is $12,000 with coverage for 6 years after project completion.
- Queensland – The minimum value of a project to require insurance is $3,300 with coverage for up to 7 months after project completion.
- South Australia – The minimum value of a project to require insurance is $12,000 with coverage for up to 5 years after project completion.
- Western Australia – The minimum value of a project to require insurance is $20,000.
Insurance brokers across all states are the right place to get quotes and see what is being included in the policy. Contact Midland Insurance is an insurance broker across Victoria and New South Wales and can help you with a range of insurance products.
5. Consumers expect home builders to be insured
As a home builder, it is your responsibility to obtain insurance that will give protection and coverage to clients. Homeowners who need to get renovation work or want to build their homes will expect builders to carry insurance.
Licensing is no longer enough assurance for these consumers to choose to hire you for the job. With the lengthy legal process entailed with chasing after builders due to loss or damage to property from shoddy work, it’s too much work for them. That’s why home builders should get themselves insured to give consumers the assurance that you’re a trustworthy builder.