The question of insurance
The home building industry involves relatively high levels of risk. These include the risks of damage to work, materials and property as well as the risk of injury to people.
Remember: Check with your insurance company or broker before you start.
The office of Fair Trading no longer operates any home warranty insurance schemes for contracts entered into after 1 May 1997. Instead private insurance companies now offer home warranty insurance policies.
Owner-builders need only take out home warranty insurance to cover subsequent purchasers of the property from defective or incomplete work if they decide to sell their home within 7 years of completing the work. If this occurs, the certificate of insurance must be attached to the contract for sale of the property.
It may be worthwhile to discuss with a potential insurer what would be required of you as an owner-builder, if you decide to sell the property within seven years of completion and want to purchase home warranty insurance at that future date.
From 1 January 1999 each licensed contractor (builder or tradesperson) who contracts directly with an owner-builder to undertake residential building work valued at over $5,000 must provide home warranty insurance from one of the approved insurance providers.
Other Insurance Issues
There are other areas of insurance that an owner-builder should have in place prior to commencing construction. Insurance for owner-builders' home building projects can be generally covered by these main risk areas:
Owner-Builders doing renovations to their home should check with their existing insurer to ensure that they do not exceed the existing cover as specified in their policy. In some cases if you do not inform your insurance company about pending alterations then this may void your existing cover.
- Builder's All-Risk Insurance
This covers the physical loss or damage to all work and materials, whether on-site or in storage.
- Public Liability Insurance
This protects the owner-builder from costs flowing from any injury to a member of the public caused by the building work.
- Workers Compensation Insurance
Also known as WorkCover Insurance. This covers costs associated with injury or loss of life of employees or 'deemed workers' involved in the work.
You may find that your financial institution (if you are borrowing money to fund the project) will insist on sighting a current certificate of insurance to ensure that you are protected against fire or other damage to the property during the course of construction or renovation.
Note: Check with your insurer or insurance broker before you start work.
The office of Fair Trading recommends that insurance policies, with the exception of home warranty insurance to cover subsequent purchasers, be put in place prior to commencing work, as insurance may be difficult to obtain after work has commenced.
Note: For more information about building insurance issues or other general insurance issues, and how they apply to you as an owner-builder, contact a Fair Trading Centre.