Builders Warranty Insurance (also called Home Owners Warranty) is a form of insurance that applies to home building work that requires building approval and costs $12,000 or more1. It protects the homeowner (and any subsequent owner) against financial loss in the event that contracted building work isn’t completed or is considered defective and the builder has died, disappeared or become insolvent.
Builders Warranty Insurance compensates homeowners in the ACT when a builder dies, disappears or becomes insolvent and is unable to complete a building project or the building works are defective.
The cover also applies if the builder is an organisation and that business ceases to exist or becomes insolvent.
The Home Building Act states that builders who contract directly with a homeowner or developer to perform residential building work must take out a policy of Builders Warranty Insurance. That makes Builders Warranty Insurance mandatory for residential building work in the ACT with a project value over $12,000.
Builders Warranty Insurance is required for any building work on residential apartment buildings and houses three storeys or lower, excluding any storey used exclusively for carparking.
It’s important to note that builders must take out Builders Warranty Insurance before commencing work on a project or requesting a deposit or any other payment. It’s the responsibility of the builder to obtain the insurance and the builder must also provide the homeowner with evidence of the insurance.
For more information, visit the ACT government’s Department of Environment, Planning and Sustainable Development website.
In the ACT, Builders Warranty Insurance covers the homeowner up to a maximum of $85,000 during the policy period, which is five years from the date of occupancy for all structural and non-structural alterations and additions.
1As at June 2021