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