Homeowners who are left with incomplete or defective construction jobs may be protected by mandatory home warranty insurance in many parts of Australia – but only if the builder has gone missing, passed away, become insolvent or lost their licence.
This type of insurance is purchased by the builder doing the work and has many different names depending on the state you live in.
What is home warranty insurance?
Home warranty insurance is designed to protect homeowners against incomplete building work and defects from construction in residential projects but it only covers you in specific situations. For example, if your builder:
Goes missing
Dies
Becomes insolvent
Loses their license
It's taken out by the builders and tradespeople themselves but is only mandatory when the build project reaches a certain value. This differs between states, as does what it's called.
Home warranty insurance in NSW and WA
Home warranty insurance functions largely the same way in both NSW and WA. The main difference is that it's often called "home building compensation" in NSW and "home indemnity insurance" in WA. It can cover you for the completion of building work or fixing defects but only if:
The builder is unable to finish the work due to death, financial insolvency or disappearance within six years of finishing the contract.
Any builder or tradesperson is required to take out this insurance for each building project over $20,000. Sub-contractors are covered by the head contractor's cover.
Finder survey: Do Australians think home insurance is worth it?
Response
Gen Z
Gen Y
Gen X
Baby Boomers
Yes
55.06%
70.38%
65.46%
72.16%
No
24.72%
17.12%
18.09%
17.33%
I don't know
20.22%
12.5%
16.45%
10.51%
Source: Finder survey by Pure Profile of 1113 Australians, December 2023
Builders warranty insurance in Victoria
Builders warranty insurance is known as "domestic building insurance" in Victoria. It can cover homeowners plus subsequent owners for incomplete or defective building work.
Applies if the builder cannot finish due to death, disappearance, financial insolvency within six years of completing the contract, or if the builder fails to comply with a court order to repair substandard work (applicable to contracts signed after 1 July 2015).
Builders are only required to take out this insurance for each building project over $16,000.
Home warranty insurance in QLD
In Queensland, home warranty insurance can cover the homeowner for incomplete construction work, defects and subsidence or settlement but:
You must make a claim within three months of noticing the defect for structural issues and within seven months of contract completion for non-structural defects.
Builders are required to take out this insurance for most residential projects valued above $3,300.
Home warranty insurance in other states like ACT, SA and TAS
Home warranty insurance is mandatory in South Australia, the ACT and the Northern Territories for projects above $12,000 but not in Tasmania. It covers homeowners for incomplete construction and structural defects in a similar way to other states. It can apply if
The work has not been completed or faulty work has not been fixed and the builder dies, disappears or is declared bankrupt.
Builders are required to take out this insurance for most residential projects valued above $12,000.
Summary of the facts
State
Minimum value of work
Length of cover for structural work
Length of cover for non-structural work
Minimum cover to be provided by insurer
ACT
$12,000
6 years
$85,000
NSW
$20,000
6 years
2 years
$340,000
SA
$12,000
5 years
$150,000
VIC
$16,000
6 years
2 years
$300,000
WA
$20,000
6 years
$100,000
Pros and cons of home warranty insurance
Pros
It can sometimes cover incomplete or defective building work.
It can be an effective "last resort" system, where you can claim only if the builder doesn't complete the work due to death, disappearance or financial insolvency.
Cons
It's only mandatory on residential building projects that exceed a certain threshold depending on the state.
It doesn't protect you from dishonest builders (you generally won't be covered if a builder refuses to repair their work or give you a refund.)
In-built cap regardless of the building project (you'll only be covered for a maximum of 20% of the contract price).
It won't cover commercial buildings.
Is it time to look at your home insurance?
Whether you're buying your first home insurance policy or looking to switch from your existing one, it always pays to compare. You can choose up to four policies at a time, select "Compare" and view the benefits side-by-side to make sure you get the right cover.
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Frequently asked questions about home warranty insurance
The process for purchasing home warranty insurance differs from state to state, although there are some similarities. In all states, you'll only be purchasing it if you're a builder or tradesperson doing residential building work.
Generally, you'll need to do the following:
Ensure you have the correct documents and applications to prove your eligibility to an insurer.
Purchase your policy through your state's provider or an insurance broker. Links to brokers, policy providers and home warranty insurance info for each state are listed at the bottom of this section. The price will depend largely on the value of your building contract.
The person who actually takes out the policy and pays the premium for home warranty insurance is the builder or tradesperson doing the work. However, the beneficiary of the policy is the homeowner whose house is having work done on it.
No, home warranty insurance policies will not generally include this feature in their cover. However, if you have a home insurance policy, you should be covered.
While the exact wording of legislation varies around the country, builders are generally required to take out home warranty insurance before any money changes hands. In South Australia, for example, the insurance must already be in place before the builder accepts any money and before they get a building permit or licence from the local government.
This means the builder has not been given eligibility for an insurer and cannot take out home warranty insurance.
You should check this closely because if you fail to do so, the insurance provider will most likely reject your claim.
If you want to make a home warranty claim, get in touch with the insurance provider via phone or email. You'll then typically have to fill out a claim form and provide full details of the reason for your claim.
Next, send the completed form to your insurer along with any supporting evidence or information they may require. This could include copies of the building contract, your certificate of insurance, the plans and specifications for the construction work, proof of payment, consultant reports you may have obtained in relation to the faulty work and much more.
Gary Ross Hunter was an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, The Guardian and news.com.au. Gary holds a Kaplan Tier 2 General Advice General Insurance certification which meets the requirements of ASIC Regulatory Guide 146 (RG146). See full bio
Gary Ross's expertise
Gary Ross has written 644 Finder guides across topics including:
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