The various types of insurance relevant to a building project can cause confusion as there is no “all encompassing” insurance. Each type will cover a different thing and they are often provided by various people, sometimes the owner, sometimes the builder, or there may even be an option for either party to take out the insurance which should be clarified prior to signing a building contract to avoid disputes.
Home Building Compensation Fund
The Home Building Compensation Fund (HBCF) provides a safety net for home owners in NSW faced with incomplete and defective building work carried out by a builder or tradesperson. Home building compensation cover protects homeowners as a last resort if their builder cannot complete building work or fix defects because they have become insolvent, died, disappeared or had their licence suspended for failing to comply with a court or tribunal order to compensate a homeowner.
A HBCF policy can be provided by either the owner or the builder so it should be clarified if the builders price for the project includes or excludes HBCF.
Information about the home building compensation scheme (previously known as home warranty insurance) can be found at www.icare.nsw.gov.au/government-agencies/our-funds-and-schemes/home-building-compensation-fund
Contract Works Insurance
A builder should have contract work insurance. It is for your protection and covers the loss or damage to materials and work.
Contract works insurance, sometimes referred to as “Construction All Risks Insurance“, covers accidental risks of physical loss or physical damage to the contract works during construction. If the builder does not have this type of insurance, you may risk:
disputes (and possible financial loss) if materials are damaged or stolen.
Public Liability Insurance
Public liability insurance covers the builder or tradesperson if anyone is injured as a result of the building work, or for any damage caused to a neighbouring home or to third party property. If the builder or tradesperson does not have this type of insurance, you could be liable because you own the property.
While public liability may sound similar to workers compensation, the easiest way to think about the differences is simple. Workers compensation is for the builder or tradesperson and their employees. Public Liability is for any non-employee that deals with or comes in contact with the builder or tradesperson, their employees, or the building site.
Workers Compensation Insurance
Make sure all employees are covered by their employer for workers compensation. This insurance covers employees who are injured on the building site.
If employers are not insured, you could be liable to pay the costs of any claim. In some circumstances, under the Workers Compensation Act 1987, these people are regarded as your employees.
Professional Indemnity Insurance
Professional indemnity insurance (PII) covers certifiers, architects, engineers and building consultants for claims against professional services provided. Services can include advice, design, certification, contract administration and project management.
As a registered architect, Ironbark Architecture is required by the Architects Act to hold current Professional Indemnity Insurance as well as Public Liability Insurance at all times.
Other insurance issues for homeowners
If you’re renovating or extending an existing home:
notify your home insurance provider in writing before construction begins
find out if your home and contents insurance policy will cover damage or theft to your home during the period of construction; sometimes, if you don’t inform your insurance company before the work begins, you may not be covered at all
your lender (if borrowing money to fund the project) will want to see a current certificate of insurance to make sure you are protected
if the value of your home has increased as a result of renovations, you may wish to increase the value of your home/building insurance policy.
For any concerns or questions you may have regarding the various insurances related to a building project you can obtain advice from the insurance facilities offered by either the Master Builders Association (MBA Insurance Services) or the Housing Industry Association (HIA Insurance Services).
Information sourced from: