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Home Building Compensation Fund 

Formerly known as the Home Warranty Insurance Scheme 

Changes to residential home building laws


New home building laws came into effect on 15 January 2015. Further amendments will start on 1 March 2015. Visit the Major changes to home building laws page to read more. 

Insurance under the Home Building Compensation Fund needs to be provided by:

  • a builder or tradesperson before taking any money (including a deposit) from a home owner (including an owner-builder) under a residential building contract and before starting any work under that contract
  • a ‘spec’ builder before starting any residential building work on a property owned by the builder
  • a developer before entering into a contract for the sale of a property on which a builder is doing or has done residential building work for the developer. 

 

Arrangements from 1 July 2010 

On 1 July 2010, the NSW Self Insurance Corporation, trading as the Home Building Compensation Fund, took over as the sole provider of insurance under the Home Building Compensation Fund in NSW.

QBE Insurance (Australia) Limited and Calliden Insurance Limited were appointed as insurance agents of the NSW Self Insurance Corporation, through a contractual arrangement.

Licensees should contact their insurance broker to obtain certificates of insurance for construction projects.

A new premium structure was implemented by the Home Building Compensation Fund for certificates of insurance issued from 1 October 2010.

For more information about the new scheme go to www.hbcf.nsw.gov.au, send an email to the Home Building Compensation Fund or contact your broker.

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Insurance threshold 

From 1 February 2012, insurance under the Home Building Compensation Fund is required to be obtained where the contract price is over $20,000 or, if the contract price is not known, the reasonable market cost of the labour and materials involved is over $20,000.

Where the contract price or the reasonable market cost of the labour and materials involved does not exceed the above threshold, there is no legal requirement to obtain insurance under the Home Building Compensation Fund.

Contractors who carry out residential building work must still hold an appropriate licence with Fair Trading where the labour and materials involved are valued at over $5,000. 

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

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Applying for insurance 

Insurance under the Home Building Compensation Fund must be obtained by the home building contractor. To apply to take out insurance, contractors need an application form from their insurance broker.

Don't slow the processing of your application. Remember to:

  • submit a complete application
  • include up-to-date financial records
  • check with your insurance broker for specific information required
  • ensure all the required information is attached to the form.

Generally you will need:

  • a recent balance sheet, profit and loss statement or tax returns
  • a statement of personal assets and liabilities
  • copies of rates notices for all properties declared on the statement of personal assets and liabilities
  • copy of current contractor licence.

The name on your licence and the name on the application form must be the same. That is, if you are:

  • a sole trader, all of the above must be only in your individual name
  • a partnership, all of the above must be in the name of you and your partner/s
  • a company, all of the above must be in the name of your company.

For contact details of insurance agents and their brokers, refer to the Approved insurance agents and Past approved insurers pages. If you need further assistance, contact NSW Fair Trading on 13 32 20.

Approved insurance agents

Past approved insurers

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Eligibility for insurance under the Home Building Compensation Fund - licence condition 

Some licences on the public register may show the condition 'Only For Contracts Not Requiring insurance under the Home Building Compensation Fund', which means a licensee can enter into contract for a price up to $20,000. 

What does insurance eligibility mean?

'Eligibility' describes the entitlement that a contractor has to apply for a Certificate of Insurance (project certificate) and the conditions under which the certificate may be granted.

Important: A certificate of eligibility is not a certificate of insurance for a specific project. It means that you have been assessed by an approved insurance agent and are entitled to apply for job-specific certificates of insurance.

Examples of certificates of eligibility are:

Examples of certificates of insurance are:

Applicants applying for building contractor licence

When an applicant for a Building Contractor Licence does not provide evidence of holding current eligibility for insurance under the Home Building Compensation Fund (HBCF), the licence will be issued with the condition 'Only For Contracts Not Requiring Insurance under the Home Building Compensation Fund'.  This condition on the licence will remain on the public register until Fair Trading receives advice from the HBCF or the licensee that the licence holder has insurance eligibility, at which time the condition will be removed and the public register updated to reflect the new status of the licence.

Existing building contractor licences

When the Home Building Compensation Fund (HBCF) advises Fair Trading that the Building Contractor Licence holder ceased to have insurance with the HBCF, the licence will be conditioned 'Only For Contracts Not Requiring Insurance under the Home Building Compensation Fund'.  This condition will remain on the public register until Fair Trading receives advice from the HBCF or the licensee that the licence holder has obtained insurance eligibility, at which time the condition will be removed and the public register updated to reflect the new status of the licence.

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Cover provided 

Minimum cover

From 1 February 2012, insurance policies under the Home Building Compensation Fund must provide cover of at least $340,000. Between 28 February 2007 and 31 January 2012, the minimum cover that had to be provided was $300,000.

The cover may be subject to limitations relating to over payment of deposits and progress payments and other limitations specified in the policy.

Claims for incomplete work are limited to 20% of the contract price (up to a maximum of the cover provided under the policy).

Periods and types of cover

Insurance policies under the Home Building Compensation Fund provide a set period of cover for loss caused by defective or incomplete work in the event of the death, disappearance or insolvency of the contractor.

Insurance policies issued under the Home Building Compensation Fund from 19 May 2009 also enable home owners to claim on the policy where the licence of the builder or tradesperson responsible for the work is suspended or cancelled for failing to comply with a money (compensation) order made by the Tribunal or a Court.

Cover for loss arising from defective work is provided for:

  • 6 years from the date of completion of the work for loss arising from a major defect in residential building work, and
  • 2 years for any other loss.

An additional 6 months' cover applies in cases where the loss becomes apparent in the final 6 months of the period of insurance. The 6-month period starts from the date of the loss becoming apparent.

Cover is also provided in the case of a fact or circumstance that may give rise to a claim for loss or damage resulting from incomplete work, not later than 12 months after the contract date, or the date provided in the contract for commencement of work, or the date work ceased, whichever is the later.

For policies issued prior to 1 February 2012, builders and consumers are encouraged to check their insurance documents for information about coverage and time periods.

For more information about when work is complete, go to the Definition of completed work section on the Contracts page on Fair Trading's website.

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Disappearance of a builder 

A builder's disappearance is one of the grounds for lodging a claim under the present version of insurance under the Home Building Compensation Fund.

NSW Fair Trading and Home Building Compensation Fund insurance providers have agreed on guidelines to be followed where a beneficiary of an insurance policy issued under the Home Building Compensation Fund cannot locate the builder in Australia.

A home owner concerned about defective or incomplete building work who is unable to locate their builder should first lodge a complaint with Fair Trading. If Fair Trading cannot find the builder, a letter will be provided to the home owner stating that the builder is unable to be located, which can be submitted with any claim to an insurer under an insurance policy issued under the Home Building Compensation Fund.

The letter does not oblige an insurer to approve a claim or prevent 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 must be accepted by the insurers as evidence of the home owner's belief that the contractor has disappeared and of the home owner having made all efforts to locate the builder. The home owner will not be required by an insurer to undertake a further search for the builder.

Fair Trading will be responsible for issuing the letter to the home owner once it has finished assessing the complaint.

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Market practice guidelines 

Market practice guidelines to govern the operation of insurance under the Home Building Compensation Fund were introduced on 1 September 2004. Insurers approved to provide insurance under the Home Building Compensation Fund in NSW must comply with these guidelines.

The guidelines include making the following information publicly available:

  • the insurer’s general underwriting guidelines and examples of premiums to be charged
  • the standard forms builders must complete and information builders must provide, to help the insurance agents consider applications for insurance
  • the details of the insurer’s service standards and the service standards of agents and intermediaries
  • the contact details of the insurer and its agents and their complaints handling process so that builders know how their concerns will be handled.

View or download in PDF format:

A person may lodge a complaint about an insurer approved to provide insurance under the Home Building Compensation Fund where the insurer does not comply with the guidelines.

Go to the Complaints against insurers page for more information.

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Securities 

  

Return of securities held by past approved insurers 

In the past, some builders and contractors provided securities such as bank guarantees to the former private insurers  to be eligible for insurance under the Home Building Compensation Fund.

Fair Trading, insurers and building industry groups have negotiated a framework and consistent industry process for the return of eligible securities. View or download in PDF format: Insurers release and retention of securities (size: 14kb).

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Securities under the current scheme 

Information about securities under the current scheme can be found on the Home Building Compensation Fund website.

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