Builder Warranty Insurance

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There’s a wealth of uncertainty in the community, seemingly amongst owners and builders alike, as to the degree of coverage of builders risk insurance for domestic (or residential) builders.

As the majority of you know, a registered domestic builder is needed to carry warranty insurance for all building contracts worth over $12,000 in value. To be able to keep the registration of theirs as domestic builders from year to year, they should be qualified for warranty insurance.

It’s mandated by the Building Act 1993 that domestic builders must carry this particular insurance, but despite the common misapprehension amongst a lot of in the builder fraternity, the insurance exists to protect owners (in limited circumstances) and shouldn’t be viewed as some back stop or’ life preserver’ for builders. This’s despite the fact the builder pays the premiums.

The scope of coverage depends on the relevant Ministerial Order that is true to the policy, based on the time the construction contract was entered into. Prior to July 2002, under the old Ministerial Orders the insurance policies had to provide owners with up to $100,000 per dwelling, in coverage for defective building works (ie in breach of the section eight warranties) and unfinished works.

Often times under the old builders risk insurance regime much emphasis and effort will be put on the Insurer forcing the first Builder to go back to site to rectify the defects of theirs at the very own cost of theirs. This’s clearly much more economic than having another contractor working over the top part of the first Builder’s work at a risk mark up.

Since July 2002 under the new insurance program as well as the following Ministerial Orders, the Insurers must provide coverage of as much as $200,000 per dwelling. The main catch though would be that under the current regime the Builder needs to have died, disappeared or perhaps become insolvent before an insurance claim may be made.