For your own protection, check the builder or tradesperson has the following types of insurance and that the certificates are current:

The Home Warranty Insurance Scheme was established under the Home Building Act 1989 and began on 1 May 1997 in NSW. Since then, the scheme has experienced some changes:

• 1 May 1997 – Home warranty insurance cover for breach of statutory warranty to be provided by private insurance companies. All builders and tradespeople required by law to give home warranty insurance certificate to home owners for work over $5,000. 
• 1 April 2002 – The threshold of insurance has been increased from $5,000 to $12,000.
• 1 July 2002 – Further changes introduced, including the reduction of the required insurance cover from seven to six years for structural work. These changes are summarised below.

Changes from 1 July 2002

Home warranty insurance after July 2002 allows a claim to be made where the contractor has become insolvent, disappeared or died. A home owner is covered for the loss caused by:

• structural defects for a period of six years after completion of the work
• non-structural defects for two years from the date of completion of the work
• incomplete work for a period of 12 months after failure to start or cessation of work.

Important. Home warranty insurance must be provided before:

• taking any money on the contract, including a deposit
• commencing the work
• supplying the kit home.

If the residential building work is valued at less than $12,000, there is no legal requirement for the builder or tradesperson to provide home warranty insurance certificate. Contractors who carry out residential building work and/or the supply of kit homes must still hold an appropriate licence with Fair Trading where the labour and materials involved are valued at over $1,000.

Persons who contract to carry out specialist work (ie. electrical wiring, plumbing, gas-fitting, air-conditioning and refrigeration) require a licence regardless of the value of the work.

Approved insurers

Home warranty insurance can only be purchased from insurance companies approved by the Minister for Commerce. There is a list of companies approved to sell home warranty insurance on the Approved insurers page.

Caution. Be wary of any builder or tradesperson who says they do not need insurance. Always check with the Office of Fair Trading before you sign the contract.

It is recommended that you check the validity of the insurance certificate by contacting the insurance company shown on the certificate.

The certificate should be an original issued by the insurer and should have the name of the contractor, homeowner, property address and total sum.

High-rise buildings

From 31 December 2003, buildings of more than three storeys that contain two or more separate dwellings (high-rise) no longer require home warranty insurance.

If things go wrong

If something goes wrong:

• and the builder or tradesperson won’t fix the problem or finish the job, Fair Trading may be able to help. For more information on the dispute resolution process, go to the Resolving building disputes page  
• you may also apply to the Consumer, Trader and Tenancy Tribunal for a hearing.

Home Warranty Insurance Scheme Board

The Home Warranty Insurance Scheme Board oversees the operation of the home warranty insurance scheme.

Exchange of insurance information

The Commissioner for Fair Trading and the Australian Prudential Regulation Authority (APRA) has entered into an exchange of insurance information arrangement. Go to the Insurance requirements and procedures page to view or download the memorandum of understanding that covers this arrangement.

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This insurance should be obtained by the builder or tradesperson. It is for your protection and covers the loss or damage to materials and work.

If the builder or tradesperson does not have this type of insurance, you may risk:

• inconvenience
• time delays
• disputes if materials are damaged or stolen.

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Covers against claims for professional advice, design, contract administration and project management.

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This covers the builder or tradesperson if anyone is injured as a result of the building work. If the builder or tradesperson does not have this type of insurance, you could be liable because you own the property.

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Make sure all employees are covered by their employer for workers compensation. This insurance covers employees who are  injured on the building site.

If employers are not insured, you could be liable to pay the costs of any claim. In some circumstances, under the Workers Compensation Act 1987, these people can be regarded as your employees.

Important. A builder or tradesperson who does not operate under a trade or company name cannot usually take out insurance to cover themselves, It is advisable to take out your own minimum premium insurance just in case.

For more information about workers’ compensation insurance or names of companies who provide this type of insurance, contact WorkCover NSW on 13 10 50.

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Home warranty insurance is necessary when the job is valued at over $12,000 for:

• developers
• speculative builders (also known as ‘spec builders’)
• suppliers and builders of kit homes.

Important. If you buy a new or recently renovated home from one of these people, make sure a certificate of home warranty insurance is attached to the contract of sale.

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If you’re renovating or extending an existing home:

• notify your home insurance provider in writing before construction begins
• find out if your home and contents insurance policy will cover damage or theft to your home during the period of construction. Sometimes, if you don’t inform your insurance company before the work begins, you may not be covered at all.
• your lender (if borrowing money to fund the project) will want to see a current certificate of insurance to make sure you are protected
• and if the value of your home has increased as a result of renovations, you may wish to increase the value of your home/building insurance policy.

Important. Always check with your home insurer or insurance broker before you sign a contract.

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