Home Indemnity Insurance

In Western Australia and all other Australian states and territories, home indemnity insurance is a requirement for all residential building work valued at over $20,000. Residential building work contracts are governed by the Home Building Contracts Act 1991, and home indemnity insurance policy can be obtained from approved insurance providers.

What is home indemnity insurance?

Home indemnity insurance is an essential insurance policy when residential building work is carried out, one that protects homeowners against financial loss in a number of situations.

These include the builder being unable to complete the building work for reasons of death, disappearance and/or insolvency, or failing to meet valid claims for building work that doesn’t meet the required standards.

Home indemnity insurance policies must, in most cases, cover the residential building work whilst it’s being carried out, and for six years from the date that the project was officially completed and the residence ready to be occupied. This is known as ‘practical completion’, and the six year period that subsequently follows, ‘the six year insurance period’.

When is home indemnity insurance required?

Home indemnity insurance is required for all ‘residential building work’ valued at over $20,000. In the law, residential building work is defined as the construction of a new dwelling, the placement of a dwelling on a plot of land, and the renovation or extension of an existing dwelling. The term ‘residential building work’ doesn’t extend to the construction or a freestanding structure like a pergola, or the construction of a swimming pool, even in instances where the building work is valued at over $20,000.

Arranging home indemnity insurance

It’s the responsibility of the builder to obtain and pay for home indemnity insurance. Once a policy has been obtained, the builder must provide the owner with a copy of the certificate before seeking a payment of any kind from the owner and before building work commences.

Although the insurance policy must be obtained and paid for by the builder, the insurance policy must be in the name of the owner. This protects subsequent owners if the owner sells the property during the construction period or the six year insurance period that follows completion of the project.

Home indemnity insurance is an important insurance policy that protects owners from financial loss; however, it doesn’t reduce builder liability. Further information about home indemnity insurance can be found on the Western Australia Chamber of Commerce website.