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Managing your Home Warranty Insurance during a Construction Boom


The announcement of the Federal Home Builder Grant and some state-based grants led to the construction industry revving into maximum gear almost overnight. This unexpected growth however, has led to challenges in the Home Warranty Insurance market with some builders having struggled to obtain eligibility for their required levels of cover.

The process of applying for and obtaining Home Warranty Insurance can be difficult to navigate, and it’s important to understand the eligibility requirements. Below, we explain what this period of sudden growth has meant for the Home Warranty Insurance market, and how builders can help ensure they’re setting their businesses up to achieve the best outcome.
 

An unprecedented acceleration in new home sales…

According to some, the recent government grants and the resulting sudden influx of business for some builders has led to a vacuum effect where homeowners who were planning to build or renovate anyway simply brought their plans forward. This spike in the number of new builds has resulted in an increase in demand for Home Warranty Insurance and as a result so too has the demand for eligibility to apply for these new projects, with insurers closely examining every application for a limit increase.

Home warranty insurance helps cover homeowners in the event a builder becomes insolvent, dies, disappears or has their builders licence cancelled during a project and for a period after completion. It helps ensure a homeowner is in a position to have their project completed by covering the cost to finish the build (subject to legislated limits).
 

How Home Warranty Insurance Eligibility is Determined

Home Warranty Insurance eligibility is assessed largely based on a builder’s financial performance to determine the likelihood of financial stress which may lead to insolvency. Insurers assess this by looking at a number of factors including:

  • Profit margin
  • Cash flow management
  • Net tangible worth
  • Creditor payments
  • Debtor management
  • Work in progress and timely construction periods
  • Management and costing system
  • Progress payments
  • Tax returns
  • Asset and liabilities
  • Associate loans on the balance sheet (for companies and trusts) 


Working with your insurance broker

This increasingly scrutinous nature of the Home Warranty Insurance market can be difficult for builders to understand, and therefore has highlighted the importance of the insurance broker’s role more than ever before. The secret to minimizing the frustration caused by the application process is to plan ahead to address any issues and to take advantage of a broker with expertise to assist you with navigating the process and advocating for you with the insurer while you get on with what you do best – Building!

The team at HIA Insurance Services specialise in Home Warranty Insurance and supporting builders with their insurance needs. Ask one of our brokers today about your Home Warranty Insurance eligibility by calling 1800 762 878 or email au.hiais@aon.com

 

© 2021 HIA Insurance Services Pty Ltd ABN 84 076 460 967 is an authorised representative no. 275925 of Aon Risk Services Australia Limited ABN 17 000 434 720 AFSL no. 241141.

The information contained on this website is general in nature and should not be relied on as advice (personal or otherwise) because your personal needs, objectives and financial situation have not been considered. So before deciding whether a particular product is right for you, please consider the relevant Product Disclosure Statement, if applicable, or contact us to speak to a HIAIS representative.

All representations set out above in relation to our insurance products are subject to full terms and conditions of the relevant policy. Please contact your HIAIS representative if you would like a full copy.

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