What is Home Indemnity Insurance?

Home Indemnity Insurance (HII) protects a homeowner (and any subsequent owner) against financial loss when a builder can’t complete contracted work or meet a valid claim for defective or unsatisfactory building work (including loss of their deposit) because the builder has died, disappeared or become insolvent.

Key Highlights

If you undertake residential building work in Western Australia valued at over $20,000,1 you must purchase Home Indemnity Insurance prior to starting the work or asking the homeowner to pay a deposit or any other money.

  • The builder carrying out the work is responsible for taking out HII.

    The builder must give the homeowner a copy of the certificate of insurance prior to commencing work or taking a deposit.

  • HII policies in WA must provide cover up to $100,000 for non-completion/statutory warranty.
  • HII policies in WA provide a maximum of $20,000 for loss of deposit.
 
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Why do I need Home Indemnity Insurance?

Simply put, a builder (any person who carries on a business that performs building work or associated work for others) must take out Home Indemnity Insurance in the name of the homeowner before they accept payment or commence work.

This requirement is mandated by Western Australia’s Home Building Contracts Act 1991 and relates to any residential building project valued at over $20,000 (subject to the exclusions noted). Any builder who doesn’t take out indemnity insurance as required can be prosecuted and fined up to $50,000, and may risk losing their builder’s registration.

The builder carrying out residential building work is responsible for taking out Home Indemnity Insurance and for giving the homeowner a copy of the certificate of insurance before:

  • starting any residential work
  • asking the homeowner to pay a deposit, or
  • asking the homeowner to pay any other money under a residential building contract

Builders need to make provision in the contract price for the cost of the insurance policy and apply to the insurer to have the work covered. The premium is a one-off payment, but note that an additional premium is sometimes required when there is an increase in contract value.

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What is covered?

Maximum contract value

Home Indemnity Insurance covers completion costs of a residential building project up to a maximum limit of $100,000 should the builder die, disappear or become insolvent and not be able to complete contracted or defective building works. The policy can also provide cover to the homeowner up to $20,000 for any loss of a deposit.

Six-year term

The policy covers potential claims for defective workmanship made up to six years from the date of ‘practical completion’ of the building work (that is, when the work is completed and the dwelling is ready for occupation). That means subsequent homeowners are also protected if they acquire the property during the construction period or during the period of the indemnity insurance cover.

Excess payable

Note that QBE Insurance, which arranges indemnity insurance cover on behalf of the WA Department of Mines, Industry Regulations and Safety, will require the payment of $500 excess to make a claim on home indemnity policy. This means that the homeowner or their successors in title may have to pay the first $500 of any claim.

Why HIA Insurance Services?

HIA Insurance Services (HIAIS) combines the construction industry expertise of the Housing Industry Association (HIA) with the risk and insurance knowledge of Aon to provide specialist products and advice to the residential construction industry.

We understand the unique risk exposures of builders, tradies and subcontractors in Western Australia. As one of the largest and most experienced insurance providers in the country, HIAIS is ideally placed to offer its customers cost-effective policies tailored for risks commonly found in the construction sector, as well as speedy and efficient insurance claims processes.

Frequently Asked Questions

Owner-builders do not need to take out Home Indemnity Insurance before they build, but they must do so if they sell within seven years from the date the building permit was granted.

A registered builder may seek an exemption from obtaining Home Indemnity Insurance if they are building their own principal place of residence. However, they must obtain cover if they sell the property within seven years of the date the building permit was granted.

As it is a builder’s responsibility to obtain Home Indemnity Insurance, subcontractors who perform building work under a contract with a registered builder don’t need to obtain cover.

If the work is associated work alone (so not forming part of the building contract for a new home) – e.g. a swimming pool, carport, fence, pergola or landscaping – Home Indemnity Insurance is not required even if the work is over $20,000.

Non-structural work such as cabinet making, tiling and painting, which does not require a building permit or is not required to be carried out by a registered builder, does not require Home Indemnity Insurance cover.

A builder who doesn’t take out Home Indemnity Insurance as required can be prosecuted and fined up to $50,000. They may also risk losing their builder’s registration. 

The builder must provide the homeowner with a copy of the ‘Notice for the Home Owner’ before a contract for home building work is signed or a deposit is paid. The Notice summarises the main requirements of the Act, including the requirement to take out Home Indemnity Insurance.

The builder must also obtain a Certificate of Insurance and provide a copy of this Certificate to the homeowner before taking a deposit or commencing the works. A copy of the Certificate is lodged with the permit authority together with the application for a building permit. The permit authority is able to refuse the application if evidence of Home Indemnity Insurance cover is not provided.

Yes, for all residential building work valued over $20,000 to be undertaken in Western Australia, the Act requires that the builder takes out Home Indemnity Insurance in the name of the homeowner before accepting payment or commencing work. The only exception is when carrying out ‘associated work’ only or work in the retirement village and multi-storey development categories.

No, Home Indemnity Insurance cover does not reduce the liability of a builder during the six-year period from the date of practical completion of the building work (or during the build). The policy will come into effect only if a ‘relevant circumstance’ exists (i.e. the builder has died, disappeared, become insolvent or had their builder’s registration cancelled, or not renewed due to insufficiency of financial resources). In all other cases a builder will remain responsible for claims made by a homeowner (or owners of the home thereafter) during the six-year period following practical completion.

An application form can be requested that allows you to request a variation to your annual limit or your ‘per dwelling limits’. We recommend you talk to an HIA Insurance Services expert to find out about making changes to your eligibility.

1Certain exclusions apply – i.e. life lease retirement villages, multi-storey/multi units (definitions apply), standalone associated works and non-structural works that are not required to be undertaken by a licenced builder or do not require a building licence.

Home Indemnity Insurance for the Building and Construction Industry in Western Australia is issued by QBE Insurance, ABN 78 003 191 035, AFSL 239545, on behalf of the Government of Western Australia via the Department of Mines, Industry Regulations and Safety (DMIRS). If you purchase this insurance through HIAIS, HIAIS will receive a commission that is a percentage of the premium. Further information can be found in HIAIS’ FSG or provided upon request.