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Home Building Compensation Fund claims 

A home owner (including a subsequent purchaser) may lodge an insurance claim under the Home Building Compensation Fund if there is a loss (eg. financial loss or damage) as a result of a builder, tradesperson, developer or owner-builder failing to complete or start work and/or failing to fix defective work. This only applies if the home owner can neither recover the financial loss nor have the work rectified or completed.

Periods and types of cover 

Insurance under the Home Building Compensation Fund provides a set period of cover for home owners and subsequent purchasers for loss caused by defective or incomplete work in the event of the death, disappearance or insolvency of the contractor.

Insurance policies issued from 19 May 2009 onwards also enable home owners to make a claim for defective or incomplete work under the policy, where the licence of a contractor they are using is suspended because the contractor failed to comply with a money (compensation) order in favour of the home owner made by a Court or the NSW Civil and Administrative Tribunal.

From 1 July 2002, 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 major defect, and
  • 2 years for loss arising otherwise than from a major 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.

For policies issued prior to 1 July 2002, builders and consumers are encouraged to check their insurance documents for information about coverage and time periods.

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Extent of cover 

From 1 February 2012, 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 insurance 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.

From 1 July 2002 an 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.

An 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 legislation.

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

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

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Notification and lodgement 

To provide insurance under the Home Building Compensation Fund in NSW, 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:  To protect their rights under an insurance policy, a home owner must notify an insurer in writing 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.

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Notification of a loss 

Insurance policies issued after 30 June 2002 protects home owners, including subsequent buyers, from defective or incomplete work where the contractor, owner builder or developer becomes insolvent, dies, disappears or for policies issued from 19 May 2009, if a contractor has had their licence suspended because the contractor fails to comply with a money order of a Court or the NSW Civil and Administrative Tribunal.

In general, home owners must lodge a claim for defective or incomplete building work within the insured period. If the work is defective, the home owner must lodge the claim within 6 months of becoming aware of the problem.

Home owner becomes aware of a loss within the final 6 months of the insurance period, they can take an additional 6 months after the end of the insured period to lodge a claim with the insurer.

In cases where a claim cannot be made within the above time frames, because the builder, owner builder or developer has not died, disappeared, become insolvent or failed to comply with a money order of a Court or the Tribunal, home owners may be able to make a claim after the period of insurance through a delayed claim.

In order to make a delayed claim, the home owner must:

  1. Notify their insurer under the Home Building Compensation Fund in writing of defective or incomplete building work within the insured period. If the work is defective, the home owner must make the notification within 6 months of becoming aware of the problem. If the home owner becomes aware of a loss within the final 6 months of the insurance period, there is an additional 6 months after the end of the insured period in which to notify the insurer. 
  2. Diligently pursue the builder, owner builder or developer to fix the defective or incomplete work after the loss becomes apparent.

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

Read the policy carefully to check the period of cover, time limits for notifying a loss and any other requirements of the insurer.

Important: To safeguard your position under your insurance policy, you should immediately notify your insurer of a loss in writing when you become aware of defective or incomplete work.

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

Note: The above timeframes only relate to notifying the insurer of a loss. A formal claim may be lodged at a later date.

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Time limits on insurance claims under the Fund 

If your certificate of insurance is dated before 30 June 2002, claims can no longer be made in accordance with the Home Building Amendment Act 2011.

Contact your insurer or call Fair Trading on 13 32 20 if you are affected by this change.

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Claiming outside the insurance period 

For any new claims against insurance policies issued after 30 June 2002, the home owner may be able to make a claim – a delayed claim – outside the insurance period. They must:

  • demonstrate the builder or tradesperson was diligently pursued to rectify the problem, and 
  • have properly notified the insurer in writing during the insurance period.

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Notification of a loss includes a 'related' loss 

It is assumed that the homeowner has notified the insurer of every loss caused by the defect when making a notification about faulty work. This provision applies regardless of what is in a homeowner’s policy.

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Take action 

A home owner must take action 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 

If attempts to have work completed or rectified prove unsuccessful you may be able to formally lodge a claim under your 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 from the insurer’s website. Some insurers prefer claims made on specific forms generally available from their 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 and insurance agents can be found on the Approved insurance agents and Past approved insurers pages of this website.

Attach to your formal claim letter copies of:

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

Other helpful documents may include:

  • 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.

For insurance policies issued before 1 July 2010, all claims (including related claims) must be lodged within 10 years of the work being completed.

Approved insurance agents
Past approved insurers

Disappearance of a builder 

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

A home owner who has a concern regarding defective or incomplete building work and 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 in Australia, which can be submitted with any claim to an insurer under an insurance policy.

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.

This letter does not oblige an insurer to approve a claim or prevent them making their 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 start when the insurer receives the claim information.

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Claims handling and complaints 

The Claims Handling Guidelines set out the manner in which insurers are required to deal with claims made by consumers under the Home Building Compensation Fund 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.

Insurers must comply with these guidelines to be approved to provide insurance under the Home Building Compensation Fund in NSW.

View or download in PDF format:

A person may lodge a complaint about an 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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Rejected or disputed insurance claims 

If 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 NSW Civil and Administrative 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 insurance cover under the Home Building Compensation Fund 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 49 Home Building Regulation 2014). The period within which to lodge an appeal may only be extended with the leave of the Tribunal.

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For policies issued up to 31 August 2005 

For insurance policies issued under the Home Building Compensation Fund 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 48 of the Home Building Regulation 2014). A home owner may, if they wish, then take the matter to the Tribunal.

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For policies issued from 1 September 2005 

For insurance policies under the Home Building Compensation Fund 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 providing all necessary claim information (clause 47 Home Building Regulation 2014).

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