Under home warranty insurance, a home owner (including a subsequent purchaser) may lodge a home warranty insurance claim in the event of a loss (eg. financial loss or damage) as a result of a builder, tradesperson, developer or owner-builder (as the case may be), failing to complete or commence work and/or failing to rectify defective work and where the home owner cannot recover financial loss nor have the work rectified or completed.

All policies

Cover is provided for loss arising from non-completion of work for a period of 12 months after the failure to commence, or cessation of, the work.

Policies issued before 1 July 2002

For policies issued before 1 July 2002, cover is also provided for a period of seven years from the date of completion of the work or the end of the contract for the work (whichever is the later), for loss arising from defective work.

Policies issued from 1 July 2002

For policies issued from 1 July 2002 onwards, cover for all losses (including loss arising from non-completion) is provided in the event of the death, disappearance or insolvency of a builder, tradesperson, developer or owner-builder. Cover for loss arising from defective work is provided for a period of:

• six years from the date of completion of the work or the end of the contract for the work (whichever is the later), for loss arising from a structural defect, and
• two years for loss arising otherwise than from a structural defect.

Policies issued from 19 May 2009

For policies issued from 19 May 2009 onwards, cover is also provided in the event of the suspension of the contractor licence of a builder or tradesperson responsible for work on the home owner’s property for failure to comply with a money (compensation) order in favour of the home owner made by a Court or the Consumer, Trader and Tenancy Tribunal. The period of cover provided in this event is the same as for policies issued from 1 July 2002.

Extent of cover

From 1 March 2007, home warranty insurance policies must provide cover of at least $300,000. Between 1 May 1997 and 28 February 2007, the minimum cover that had to be provided was $200,000.

Future increases in the minimum cover provided under the scheme will be in line with any corresponding increase in the Producer Price Index [Materials used in House Building (Sydney)] that might have occurred since the previous increase. The next review of the minimum cover will occur in mid 2010.

From 1 July 2002 a home warranty insurance policy must indemnify beneficiaries under the policy for the following losses or damage:

• breach of statutory warranty
• faulty design (provided by contractor or supplier)
• cost of alternative accommodation, removal and storage costs reasonably and necessarily incurred
• loss of deposit or progress payment
• materials and components used in kit home not good or suitable for purpose
• faulty design, or non-supply of a kit home 
• non-completion of work due to early termination of the building contract (because of the contractor’s or supplier’s failure or refusal to complete the work)
• legal or other reasonable costs incurred in seeking to recover compensation from the contractor or supplier for the loss or damage or the taking of action to rectify the loss or damage.

A home warranty insurance policy will not cover a beneficiary for the loss of a deposit that exceeds the amount specified under the legislation (i.e. 10% for contacts of $20,000 or less, and 5% for contracts of more than $20,000), or for the loss of a progress payment that exceeds the amount specified under the building contract for the payment.

Claims for incomplete work are limited to 20% of the contract price up to a maximum of $200,000 for policies issued between 1 May 1997 and 28 February 2007 and from 1 March 2007 onwards up to a maximum of $300,000.

The cover may be subject to other limitations specified in the policy.

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As part of the conditions of approval to provide home warranty insurance in New South Wales, insurers are required to comply with provisions contained in the Home Building Act 1989, Home Building Regulation 2004 and Claims Handling Guidelines concerning the acceptance of claims under home warranty insurance policies.

The legislation and Guidelines distinguish between:

1. the notification of a loss, and
2. formal lodgement of a claim.

Important:  In order to ensure that future rights to lodge a claim under a home warranty insurance policy are protected, a home owner must notify an insurer of a loss within the periods contained in the legislation. A formal claim (with all required supporting documentation) may then be lodged at a later date.

Notification of a loss

The legislation provides that where a home owner gives notice of a defect to an insurer, the home owner is taken to have given notice of every defect to which the defect is directly or indirectly related.

Accordingly, and in order to safeguard your position under your home warranty insurance policy, when you become aware of defective or incomplete work, you should immediately notify your home warranty insurer, in writing, of a loss.

Generally, a loss should be notified to the insurer within six months of the home owner becoming aware of defective work. This must occur during the period of cover (or within six months of the loss becoming apparent where that occurs in the last six months of the period of cover).

Notification of a loss in relation to incomplete work should be notified to the insurer within 12 months of the contract date, or the date provided in the contract for commencement of work, or the date the work ceased, whichever is the later.

Notification within these periods will mean that the insurer cannot reduce its liability under the policy, or reduce any amount otherwise payable in respect of a claim, merely because of a delay in the insurer being notified of a loss.

Nevertheless, a loss resulting from defective work can still be notified to an insurer at any time within the period of cover (or within six months of a loss becoming apparent where that occurs in the last six months of the period of cover).

Use the Notification of a loss form in PDF format (size: 37kb) to notify your home warranty insurer of a loss under your home warranty insurance policy.

Take action

A home owner must take action (eg. initiate dispute resolution by lodging a complaint with the Office of Fair Trading) to try to have the builder finish any incomplete work and rectify any defective building work. Where a home owner does not take action to enforce a statutory warranty an insurer may reduce its liability (or the amount paid under a claim), to the extent that the insurer’s interests have been prejudiced as a result of the home owner not trying to have the builder complete or repair the work.

Resolving building disputes

Formally lodging a claim

In the event that attempts to have work completed or rectified prove unsuccessful you may be able to formally lodge a claim under your home warranty insurance policy.

You should read your policy carefully to confirm the period of cover and the time limits for lodging claims and any other requirements of the insurer.

Ask the insurer to send you information on the actual insurance policy and their claims-handling procedures or access this information on the insurer’s website. Some insurers prefer to have claims made on specific forms which generally can be downloaded from the insurer’s website. If an insurer refuses to provide you with a claim form, you are still entitled to make a claim in writing and have its receipt acknowledged by the insurer. It may help to send the claim by registered post.

Contact details for insurers can be found on the Approved insurers and Past approved insurers pages of this website.

You need to attach copies of all the following documents to your formal claim letter:

• home warranty insurance certificate
• the contract you signed with your contractor
• any document showing agreed variations.

Other documents which may also be helpful are:

• independent reports itemising defects and necessary rectification or completion work
• estimates of costs to fix the itemised defective or incomplete work
• photographs
• relevant letters or documents supporting your claim.

Approved insurers
Past approved insurers

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The disappearance of a builder is one of the grounds for lodging a claim under the present version of the home warranty insurance scheme.

The Office of Fair Trading and home warranty insurers have agreed on guidelines to be followed where a beneficiary of a home warranty insurance policy cannot locate the builder.

A homeowner who has a concern regarding defective or incomplete building work and who is unable to locate their builder should, in the first instance, lodge a complaint with Fair Trading. In the event that Fair Trading cannot find the builder, a letter will be provided to the homeowner stating that the builder is unable to be located, which can be submitted with any claim to an insurer under a home warranty insurance policy.

The provision of the letter will not in any way oblige an insurer to approve a claim or preclude an insurer from making its own enquiries to try to locate the builder. The period in which an insurer is required to determine a claim (ie 45 or 90 days, depending on when the policy was issued) will commence when the insurer receives the claim information.

The letter will, however, be accepted by the insurers as evidence of the homeowner's belief that the contractor has disappeared and of the homeowner having made all efforts to locate the builder. The homeowner will not be required by an insurer to undertake a further search for the builder.

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The Claims Handling Guidelines set out the manner in which home warranty insurers are required to deal with claims made by consumers under home warranty insurance policies.

The guidelines were developed in consultation with insurers and introduced on 1 September 2005. They address issues such as claim procedures; service standards; publication of information; third party service providers; the provision of written reasons for decisions, and complaint and dispute resolution procedures.

Compliance with these guidelines is a condition of approval for insurers to provide home warranty cover in NSW.

View or download the Claims Handling Guidelines in PDF format (size: 67kb)

A person may lodge a complaint about a home warranty insurer where the insurer does not comply with the provisions of the Claims Handling Guidelines.

Go to the Complaints against insurers page for more information.

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In the event that a claim is rejected or the amount approved for payment by the insurer is considered unsatisfactory, the home owner may appeal the insurer’s decision through the Consumer, Trader and Tenancy Tribunal (Tribunal). Note that your claim to the Tribunal will be against the insurer, not the builder.

There is a $500,000 limit on orders that can be made by the Tribunal in relation to residential building work.

The Tribunal can hear appeals arising from private home warranty insurance cover for a period of up to 10 years from completion of the work. Generally, appeals must be lodged within 45 days of written notification by the insurer that the claim has been rejected (clause 65 Home Building Regulation 2004). The period within which to lodge an appeal may only be extended with the leave of the Tribunal.

For policies issued up to 31 August 2005

For home warranty insurance policies issued up to 31 August 2005 an insurance claim is taken to have been refused if a decision is not given to the claimant within 45 days (clause 64 of the Home Building Regulation 2004). A home owner may, if they wish, then take the matter to the Tribunal.

For policies issued from 1 September 2005

For home warranty insurance policies issued from 1 September 2005 onwards, an insurance claim is deemed to have been accepted if the insurer has not determined liability within 90 days of the home owner having provided all necessary claim information (clause 62A Home Building Regulation 2004).

View or download the Acceptance of a claim explanatory notes in PDF format (size: 22kb)

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