Insurance under the Home Building Compenation Fund (previously called the Home Warranty Insurance Scheme) is established under the Home Building Act 1989 and commenced on 1 May 1997. It is an integral part of the consumer protection package for home owners having building work undertaken.
After new arrangements in NSW for insurance under the Home Building Compensation Fund commenced on 1 July 2010, the NSW Self Insurance Corporation, now trading as the NSW Home Building Compensation Fund, took over as the sole provider of insurance under the Home Building Compensation Fund within NSW.
The insurance policies issued before the commencement of the new Government underwritten scheme will remain in force, and the insurer that issued the policy will remain responsible for the period of cover.
For more information, go to the Home Building Compensation Fund website at www.hbcf.nsw.gov.au
Insurance under the Home Building Compensation Fund needs to be provided by:
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. Before 1 February 2012, this threshold was $12,000.
Where the contract price or the reasonable market cost of the labour and materials involved does not exceed $20,000, 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.
Home owners should be wary of any builder or tradesperson who says they do not need insurance if the value of work exceeds $20,000, or who suggests you obtain an owner-builder permit while they carry out the work for you.
The certificate of insurance under the Home Building Compensation Fund should be an original issued by the insurer and should have the name of the contractor, home owner, property address and total value of the contract. The builder’s name shown on the insurance certificate should be exactly the same as that on the building contract and the builder’s licence.
Before making any payment under a sale or building contract, home owners should check their certificate of insurance is valid by contacting the approved insurance agent whose contact details appear on the certificate or by contacting the Home Building Compensation Fund.
Important: A certificate of insurance is separate to a certificate of eligibility. A certificate of insurance is insurance cover issued specifically for your project. ‘Eligibility’ merely means that the builder has been assessed by an approved insurance agent and been granted the entitlement to apply for job-specific certificates of insurance. Make sure the certificate of insurance you receive is a job-specific certificate issued for your project.
Examples of a certificate of insurance and a certificate of eligibility can be found on the Home Building Compensation Fund page for Tradespeople on Fair Trading's website.
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. From 1 May 1997 to 28 February 2007 the minimum cover 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, which measures change in the price of wholesale goods and services.
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 at least 20% of the contract price (up to a maximum of the cover provided under the policy).
Construction of a new multi-storey residential building does not require insurance cover under the Home Building Compensation Fund to be in place. To be exempt from insurance requirements, a multi-storey building is a building that:
Storey and rise in storeys has the same meaning here as it has in the Building Code of Australia of the National Construction Code Series.
Construction of a new multi-unit residential development (where the rise is three storeys or less, eg. villa units, town houses, low and medium rise projects etc) does require insurance cover under the Home Building Compensation Fund. In this instance, a developer is required to attach the certificate of insurance to the contract for sale of such dwellings.
Similarly, insurance cover must also be taken out before residential building work is done on an existing multi-storey building (eg. repairs, maintenance, alterations and additions etc).
Section 97 of the Home Building Act 1989 allows the Chief Executive to grant an exemption from the requirements for insurance under the Home Building Compensation Fund contained in Part 6 of the Act, if satisfied that there are exceptional circumstances or that full compliance is impossible or would cause undue hardship. (Clause 55 of the Home Building Regulation 2014 prescribes persons entitled to apply for an exemption).
An exemption will not be considered where insurance under the Home Building Compensation Fund cannot be provided because of a contractor’s financial or business circumstances or where building work has already commenced.
Residential building work done by some Government departments is automatically exempted from the insurance provisions (section 103E Home Building Act 1989; clauses 59 and 60 of the Home Building Regulation 2014).
Under the legislation governing the operation of the development and construction approval process, the Council/principal certifying authority is required to be notified of the builder for the project. It is also a condition of the approval for a project that insurance under the Home Building Compensation Fund be obtained. Where insurance under the Fund is not obtained, the Council/principal certifying authority may not be able to issue an occupation certificate for the completed building work. This may impede the sale of the property and affect its market price.
A home owner, or subsequent purchaser, can lodge with or notify an insurer of a claim under their insurance policy in the event of a loss 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. This only applies if the home owner can neither recover the financial loss nor have the work rectified or completed.
For home owners to safeguard their position under an insurance policy, once they become aware of defective or incomplete work they should immediately notify the insurer approved under the Home Building Compensation Fund of a loss. This notification must be in writing and provide the necessary information to notify the insurer of the nature and circumstance of the loss.
The Home Building Compensation Fund claims page on the Fair Trading website has information about making a claim, periods and types of cover as well as claim notification and lodgment procedures. More information is also available on the Resolving building disputes page.
The Home Building Compensation Fund Board was established to oversee the operation of insurance under the Home Building Compensation Fund. As part of its ongoing monitoring role, the Home Building Compensation Fund Board is examining how the scheme may be improved for home owners and builders. For more information, refer to the Home Building Compensation Fund Board page on the Fair Trading website.
Insurance agents authorised to provide insurance services on behalf of the NSW Home Building Compensation Fund for residential building work under the NSW Home Building Act 1989 are; Calliden Insurance Limited and QBE Insurance (Australia) Limited. For more information go to the Approved insurance agents page on the Fair Trading website.
For information on insurers that were previously approved to sell home warranty insurance, go to the Past approved insurers page on the Fair Trading website.
The certificate of insurance should be an original issued by the insurer and should have the name of the contractor, home owner, property address and total sum. The builder’s name shown on the insurance certificate should be exactly the same as that on the building contract and the builder’s licence.
Before making any payment under a sale or building contract, home owners should check their certificate of insurance is valid by contacting the insurer whose contact details should appear on the certificate or by checking the certificate online via the Home Building Compensation Fund public register.
Fair Trading is able to investigate complaints about insurers approved to provide insurance under the Home Building Compensation Fund in NSW under the Home Building Act 1989. For more information, refer to the Complaints against insurers page on the Fair Trading website.
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