Builders Warranty Insurance (also known as Home Warranty Insurance) is a statutory product which is compulsory under relevant building legislation in most States for builders carrying out residential building work.

Builders Warranty Insurance protects consumers from financial loss caused by a builder’s failure to rectify or compensate for defective or incomplete residential building work. Builders are responsible for taking out Builders Warranty Insurance at the time of entering into a building contract with a homeowner.  Owner builders are also required to obtain Builders Warranty Insurance if the property is to be sold within six years of obtaining the occupancy permit.

The policy only applies if the builder dies, disappears, becomes insolvent or bankrupt either during construction of within the relevant periods, depending on the work completed. Therefore, in most instances disputes about defects and warranties will need to be resolved directly between the owner and the builder.

The warranty period is calculated from the date of the occupancy permit or the certificate of final inspection and is six years for structural defects and two years for non-structural defects.
A builder must provide the owner with Builders Warranty Insurance when domestic building work is done in excess of the following amounts:

• $12,000 in South Australia and the Australian Capital Territory
• $16,000 in Victoria
• $20,000 in New South Wales and Western Australia

In order to obtain Builders Warranty Insurance, builders must first be granted with a Letter of Eligibility. This eligibility will define the building activities and the value of works the builder has been approved for.

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