LawTalk Blog

What is building indemnity insurance and do I need it on my home build?

building indemnity insurance

Building indemnity insurance is insurance which is taken out by the builder for your benefit to protect against the builder being unable to complete (or rectify faulty) domestic building work in the event of the insolvency or death of the builder.

As you may have read, in South Australia, QBE intended to cease offering building indemnity insurance as of 1 July 2013, citing many insolvencies within the building industry as having a significant effect on serviceability of building indemnity insurance policies.

The insurance does not cover accidental damage to the site, nor the theft or damage of any items or equipment left on site by either you or the builder.

The insurance is a legislative requirement for building work costing more than $12,000.00, irrespective of whether it is new build, a renovation or an extension.

At law, the building workscannotcommence until such time as building indemnity insurance has been obtained by the builder and a copy of the insurance certificate has been provided to you and to the council.

The insurance can usually be called upon for a period of five years from completion of the work or default by the builder, subject to certain provisions. Accordingly, if you sell your house within five years of the works being performed, you need to advise the purchaser whether the insurance is in place.

In light of the QBE announcement, proposals to have the insurance underwritten by the State government instead of a private insurer were explored. At present, however, QBE still offers building indemnity insurance in South Australia. This may change.

Given that it is a legislative requirement that building indemnity insurance is taken out for any building works of substance, and further that such policies are clearly often needed (to the point where they are causing financial burden to the insurer) we always advise our clients to ensure that their insurance is correctly in place prior to building works commencing.

We are able to advise you on all contractual and legislative aspects of building contracts, including the requirements for insurance. We are also able to assist you in claiming on the insurance in the event that such a claim is needed.


Get in touch with today's blog writer:
Felix Hoelscher

Partner in Commercial Law and Business Law

Please note, this Blog is posted in Adelaide, South Australia by Andersons Solicitors. It relates to South Australian legislation. Andersons Solicitors is a medium sized law firm servicing metropolitan Adelaide and regional South Australia across all areas of law for individuals and businesses.

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