What is home warranty insurance?
If you are looking at building a new home, insurance is one of the big factors to consider (in more ways than one).
So, to make things a little easier for you to get your head around, we have put together some information regarding home warranty insurance. If it's something you haven't considered before, or something you didn't know about, make sure you do. And, for more information, call Symcorp on 07 5594 1768 or head to the QBCC home warranty page.
Please note, this article is a guide only and is not designed to replace professional advice. Always speak to a qualified professional before making any decisions regarding insurance and complete your own extensive research.
What is home warranty insurance?
Home warranty insurance, which is also known as builders' warranty insurance, domestic warranty insurance, housing insurance, and home indemnity insurance, is designed to protect homeowners from dodgy builders. It is an amount paid to insure residential construction projects.
How does home warranty insurance work?
As part of a building process, a builder pays a premium to the QBCC. The amount is included as part of your contract, and is paid before work begins.
If QBCC pay out on a claim, they will pursue the builder to recover the claim amount.
Do you need home warranty insurance?
Most residential building work done in Queensland valued over $3,300 (including labour and materials) must have home warranty insurance.
How long does a home warranty insurance policy last?
The relevant work is covered for a period of 6 years 6 months from the earliest of the following dates:
- When the premium is paid.
- When a contract is entered.
- When work is commenced.
If the work takes longer than 6 months to complete, the period of cover is extended.
What kind of work does home warranty insurance cover?
There is a range of work that home warranty insurance covers including*:
- Construction of a new house or related roofed building - for example a garage.
- Construction of a townhouse or multiple unit dwelling which is no more than 3 storeys.
- An extension, addition, alteration, renovation or repair of any of the above properties listed in points 1 and 2.
- The replacement or refit of fixtures or fittings in a kitchen or a bathroom.
- The work completed on a deck or verandah which is attached to a house or residence.
- Any building work that affects the structural integrity of a building.
Also, from 28 October 2016, in addition to the above, the following work is also covered:
- Any work on or in the home or related roofed building - for example painting.
- Any work on a deck or verandah attached to a related roofed building.
- Anything attached to the home or related roofed building.
- Any structure attached to the external part of a home or related roofed building which has no other supporting structure - for example an awning or handrail.
- Stairs or a ramp which provide access and are permanently attached to the home or related roofed building.
- Swimming pools.
*List courtesy of QBCC
What cover is applicable?
According to the QBCC the following applies in various circumstances:
- Insurance Policy Conditions Edition 7 applies to contracts signed between 29 September 2006 and 30 June 2009.
- Insurance Policy Conditions Edition 8 applies to contracts signed between 1 July 2009 and 27 October 2016.
- Queensland Building and Construction Commission Regulation 2018, Schedule 6.
- Queensland Home Warranty Scheme Product Disclosure applies to contracts signed from 28 October 2016. For a summary of the cover see Queensland Home Warranty Scheme Product Disclosure (PDF).
What may home warranty insurance protect you from?
Home warranty insurance may protect you where:
- Contracted residential construction work is not completed by the relevant licensed builder and you terminate the contract.
- A contractor fails to rectify defective work.
- A building suffers from subsidence or settlement.
- Building hasn't commenced yet: Deposit can be returned.
- Building work is under progress: If you have terminated your contract because your builder has defaulted before all work is completed, you may be able to get help to complete your project under the Queensland Home Warranty Scheme.
- Building is complete but with defects: If work is finished, the Queensland Home Warranty Scheme may help if the builder goes bankrupt, goes into liquidation, dies or is in another country. It may also help if the builder fails to rectify defects which have resulted in a QBCC Direction to Rectify or the building suffers from subsidence or settlement.
According to the QBCC common grounds for contract termination due to the builder’s default include:
- A builder os working under their own name as a sole trader and they go bankrupt.
- A builder operating as a company is placed or is being placed into administration or liquidation.
- A suspension or cancellation of a builder’s licence.
The Queensland Home Warranty Scheme helps protect home owners from additional costs resulting from a licensed contractor not fixing their defective building work or not completing their contracted work. The standard cover offered is a maximum of $200,000, including a maximum amount of $5,000 for alternate accommodation, removal and storage costs.
If you sign a building contract on or after 28 October 2016 however, additional cover is available to be purchased by the homeowner. This increases the maximum entitlement to $300,000, including a maximum of $10,000 for alternate accommodation, removal and storage costs. If you signed a contract prior to 28 October 2016 you may be eligible for optional additional cover.
The homeowner must pay the premium either within 30 business days of entering the contract or before the work has started (whichever is earlier).
What happens if you have a complaint?
Contact QBCC if you have a complaint and they can commence the dispute resolution process.
If your complaint is includes residential construction work and was not satisfactorily resolved through QBCC’s dispute resolution process, your application will be assessed for eligibility for assistance under the Queensland Home Warranty Scheme. A separate form is not required for this to occur.
There are time limits that may apply to some claims including:
- Structural defects: Complaint form must be lodged within 3 months of noticing the defect.
- Non-structural defects: Complaint form must be lodged within 7 months of the completion date.
How do I check for home warranty insurance cover?
Once you have signed a contract for residential construction work to be completed, the QBCC will send you a notice of cover. A notice of cover includes the details of the work, the builder and the premium paid and this should be received before any work begins. To check, contact the QBCC with the property details including address, lot and plan number and they can assist further.
Tip from QBCC: If you are a subsequent owner of the property, you can search to see if the property has cover under the Queensland Home Warranty Scheme. The search can be done online by registering with myQBCC or complete an Insurance Search Request form.
A few tips when it comes to home warranty insurance
- Contract: Always make sure you have contract with your builder - it is a legal requirement ensures that you have access to the full range of benefits under the Queensland Home Warranty Scheme.
- Fixed price: Always get a fixed price for the work that is being completed, so the project does not blow out your budget. Additionally, having a fixed-price contract also provides peace of mind so that if something goes wrong and construction isn't completed by your builder, you can make a claim for completion of the work.
If a builder defaults on an obligation to finish a fixed price contract, you may be entitled to compensation for the extra cost to complete the work, above the fixed cost. - QBCC
- Avoid: Avoid cost-plus contracts and construction management contracts, as these can result in cost blow-outs if managed incorrectly. You are not entitled to claim if the works are left incomplete under a cost-plus contract, as there is fixed cost for the work and you pay as you go. So, if the contract is managed properly, no loss should be suffered if the work is not completed.
- Commercial: The Queensland Home Warranty Scheme assists homeowners, not those involved in commercial arrangements.
- More than one contract: If a person enters into one or more contracts, in force at the same time, to construct three or more dwellings or living units, no assistance is provided under the Queensland Home Warranty Scheme. Assistance is available to a subsequent purchaser of a dwelling or unit though.
If you have any further questions, or would like some assistance with a new build, give Symcorp a call on 07 5594 1768 and we can help.
QBCC (Home warranty insurance overview): https://www.qbcc.qld.gov.au/home-warranty-insurance/overview
QBCC (Home warranty insurance explained): https://www.qbcc.qld.gov.au/home-warranty-insurance/home-warranty-insurance-explained
Choice (Home warranty insurance): https://www.choice.com.au/money/insurance/home-and-contents/articles/home-warranty-insurance
Please note, this article is a guide only and is not designed to replace professional advice. Always speak to a qualified professional before making any decisions regarding loans and complete your own extensive research.