Understanding Home Owners Warranty Insurance in NSW

Home Owners Warranty Insurance, also known as Home Building Compensation Fund (HBCF) Insurance, is a critical safeguard for homeowners in New South Wales. This insurance protects homeowners in the event that their builder or contractor cannot complete a building project or rectify defects due to insolvency, death, disappearance, or licence suspension.

What does it cover?

1. Incomplete building work. If your builder is unable to complete the project, the insurance covers the costs of completing the work up to the policy's maximum limit.
2. Defective work. Covers the cost of rectifying any defective building work discovered during the warranty period.
3. Non-structural defects. Typically covered for two years after completion of the work.
4. Structural defects. Covered for six years after the completion date.

Who needs it?

This insurance is mandatory for all residential building projects valued at over $20,000 in NSW. It must be obtained by the builder or contractor before commencing work and before accepting any payment, and is typically included as part of the building contract.

Key features

• Coverage limit. Generally the insurance provides coverage up to $340,000 per claim, but this amount may vary depending on the specific policy.
• Transferable coverage. If you sell your property within the warranty period, the benefits of the insurance transfer to the new owner.
• Exclusions. The insurance does not cover damage caused by natural disasters, owner negligence, or fair wear and tear.

How to make a claim

1. Identify the issue. Document the defect or incomplete work with photographs and detailed notes.
2. Attempt to contact the builder. Before lodging a claim, try to resolve the issue directly with the builder if possible.
3. Notify icare of your loss. Protect your right to claim in future by lodging a Notification of Loss form as soon as the loss arises.
4. Determine eligibility to lodge a claim. Claims can only be lodged if the builder or contractor has disappeared, gone bankrupt, passed away, or had their licence suspended.
5. Submit a claim. If the builder meets the eligibility conditions and is unable to address the issue, submit a claim to the insurer, providing all necessary evidence and documentation.
6. Assessment and resolution. The insurer will assess your claim and, if approved, arrange for the work to be completed or compensated.

Why it matters

Warranty insurance is what stands between a homeowner and the full cost of a build that stops halfway. It also gives builders a reason to keep their standards and their licence in good order.

How we can help

We work in construction law every week. If you need someone to read the policy properly, deal with an insurer, or run a dispute about defective or incomplete work, that is the kind of matter we take on.

This publication provides general information of an introductory nature and is not intended and should not be relied upon as a substitute for legal or other professional advice.