Home Warranty Insurance
This insurance is known by different names in some states, it can also be know as liability insurance. In NSW this insurance is required by law for projects over a certain value, and covers you for loss caused by defective work for a period of seven years or a period of 12 months for incomplete work.
So that you know you are covered by this insurance the contractor must give you a certificate of insurance before any work is commenced. The insurance certificate may have a slightly different title but you'll know it's for home warranty insurance if it makes reference to a government 'Act' such as the Home Building Act 1989 or the Building Act 2004 at the top. The builder or tradesperson must have the relevant insurance for any work that falls under the applicable act*, if they do not have the right insurance they are committing an offence under Australian law.
Note: Work is usually defined by an amount that varies from state to state; the insurance will only be applicable if the value of the work is more than the minimum value specified in the Act specific to your state.
For example in NSW, if you as a homeowner enter into a contract with a carpenter for some domestic work for a sum over $5,000, then that carpenter must take out the necessary home warranty insurance. This applies to all work, so be wary of any contractor who tries to explain it away with a comment such as, 'This is not relevant to me or this work'.
Always check with the department that regulates the licences for builders in your state.
Important points to remember:
- Insurance is required to be taken out by builders and tradespeople for residential building work (including kit home supply) valued over a certain amount, before the residential building work commences or the kit is supplied.
- Contracts must be in writing and the insurance certificate must be given to the customer before work commences.
- No payments should be made for kit home supply (as a deposit or otherwise) until the insurance is in place and the certificate of insurance has been given to the customer.
- Developers having work done by a licensed builder must attach a certificate of the builder's insurance to the sale contract.
- Contractors will not be able to take their customer to court to enforce the contract and be paid unless insurance has been taken out.
- When a claim is paid by an insurer to rectify defective work, the insurer has a right to seek recovery of that payment from the builder or owner-builder.
Other insurance issues
Making sure the builder or tradesperson has all the right insurance policies could be one of the most important things you do when building or renovating your home. It is not enough to ask a builder or tradesperson if they have particular types of insurance. You should ask to see the insurance certificates or other evidence of cover before you sign the contract. For your own protection, check if the builder or tradesperson has the following types of insurance and that the certificates are current:
- Home Warranty Insurance or Housing Indemnity Insurance(note this insurance is known by different names in each state but essentially covers the structural integrity and construction quality of your home once built).
- Builder's All-Risk Insurance
This covers the builder or tradesperson against the loss of or damage to work and materials, whether on-site or in storage.
- Public Liability Insurance
This covers the builder or tradesperson from costs flowing from any injury to a member of the public (including the homeowner and their family) caused by the building work.
- Workers Compensation Insurance(also known as WorkCover Insurance)
This covers anyone employed by the builder or tradespeople against work related personal injury.
Policies should be put in place prior to commencing work as it may be difficult to obtain insurance after work has commenced. Make sure the job is covered before you sign any contract.
Other insurance issues for homeowners
Builders or tradespeople usually cannot take out workers compensation insurance to cover themselves and you could become liable if they are injured on your job. It is therefore advisable to take out your own workers compensation insurance, just in case. In many cases the premium is relatively small. You may be able to add cover to your existing home insurance policy.
People contemplating doing renovations to their home should check that they do not exceed their existing insurance cover as specified in their insurance policy. You must inform your insurance provider about any pending alteration to your home before renovations take place.
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 sign a contract!
Things don't always go to plan when you are building or renovating. If you discover that the work done by the builder or tradesperson is defective, either while the work is in progress or when the job is finished, you should notify the builder or tradesperson immediately so that it can be rectified. Try to sort out the problem first with your contractor. However, if the problem can not be resolved by talking to your builder or tradesperson, you may contact the Builders Association or Fair Trading office for assistance. They may be able to offer you a range of options to help you resolve the dispute.
If you have a certificate of home warranty insurance you may contact the insurer if the work is defective or incomplete and the builder or tradesperson will not rectify or complete the work.
For further information go to http://www.industry.gov.au and search for dispute resolution in the building industry.
If you look at exhibition homes and decide on one of the designs, then in most cases you have selected your builder. You will have to negotiate with the project builder if you want any changes to the design, fixtures, fittings and total cost. By law, your new home must be built to the same standard of work and materials used in the exhibition home.