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Home warranty insurance 

Information for licensees 

Reform of the residential home building laws


The New South Wales Government is reviewing the residential home building laws. Visit the Review of the home building legislation page to read more and to download the position paper which outlines the 50 proposed changes to the current laws.

Home warranty insurance 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
  • an owner-builder (ie. a home owner who did owner-builder work under an owner-builder permit) before entering into a contract for sale of the property on which residential building was done within the previous 6 years.

 

Arrangements from 1 July 2010 

On 1 July 2010, the NSW Self Insurance Corporation, trading as the NSW Home Warranty Insurance Fund, took over as the sole provider of home warranty insurance 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 policies and certificates of insurance for construction projects.

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

For more information about the new scheme go to www.homewarranty.nsw.gov.au, send an email to the Home Warranty Insurance fund or contact your broker.

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Insurance threshold 

From 1 February 2012, home warranty insurance 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 for home warranty insurance to be obtained.

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 $1,000. 

Persons 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 

Home warranty insurance must be obtained by the home building contractor. To apply to take out insurance, contractors will need to get an application form from their insurance broker.

You can minimise delays with your application by:

  • submitting a complete application
  • including up-to-date financial records
  • checking with your insurance broker for specific information required
  • making sure that all the required information is attached to the form.

You are generally required to provide the following information:

  • recent balance sheet, profit and loss statement or tax returns
  • 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
  • if you were previously approved through another insurer, declaration of jobs undertaken and currently insured for the past 12 months.

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. Should further assistance be required, contact NSW Fair Trading on 13 32 20.

Approved insurance agents

Past approved insurers

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Home warranty insurance eligibility - licence condition 

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

What does Home Warranty Insurance Eligibility mean?

'Eligibility' is the term used to describe the entitlement that a builder has to apply for a Certificate of Insurance (project certificate) and the conditions under which the certificate may be granted.

Caution - A certificate of eligibility is not a certificate of insurance for a specific project. A certificate of eligibility merely means that you have been assessed by an approved insurance agent and has been granted the entitlement 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 Home Warranty Insurance with the Home Warranty Insurance Fund (HWIF), the licence will be issued with the condition 'Only For Contracts Not Requiring Home Warranty Insurance'.  This condition on the licence will remain on the public register until Fair Trading receives advice from the HWIF that the licence holder has Home Warranty 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 Warranty Insurance Fund (HWIF) advises Fair Trading that the Building Contractor Licence holder ceased to have Home Warranty Insurance with the HWIF the licence will be conditioned 'Only For Contracts Not Requiring Home Warranty Insurance'.  This condition will remain on the public register until Fair Trading receives advice from the HWIF that the licence holder has obtained Home Warranty 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, home warranty insurance policies 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.

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 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

Home warranty insurance provides 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.

Home warranty insurance policies issued 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 a period of:

  • 6 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
  • 2 years for loss arising otherwise than from a structural defect.

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

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, to the Definition of completed work section on the Contracts page on Fair Trading's website.

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Disappearance of a builder 

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

NSW 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 home owner 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 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 homeowner on completion of its assessment of the complaint.

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Market practice guidelines 

Market practice guidelines to govern the operation of home warranty insurers were introduced on 1 September 2004. Compliance with the guidelines is a condition of the approval for insurers to provide home warranty insurance in New South Wales.

The guidelines are designed to bring more transparency and accountability to the provision of home warranty insurance. Core features of 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 a home warranty insurer where the insurer does not comply with the provisions of 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 home warranty insurers in order to be elegible for home warranty insurance.

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 securites under the current scheme can be found on the Home Warranty Insurance Fund website.

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