Home Indemnity insurance (HII) is a legal requirement in WA for all residential building projects over the value of $20,000. It is to provide protection for you, the consumer, against loss or other particular financial burdens. In other states of Australia is known as Builders Warranty insurance or Residential Builders Warranty.
“Home indemnity insurance covers home owners for loss of deposit, incomplete or defective building work if their builder dies, disappears or becomes insolvent. It’s a requirement for residential building work valued over $20,000.” – QBE insurance
All residential building work contracts in WA are governed by the Home Building Contracts Act 1991 (the Act). The Act requires that if any residential building work valued over $20,000 is undertaken, the builder must take out Home Indemnity insurance in the name of the owner before accepting payment or commencing work.
The builder is responsible for organising HII
Let’s clarify the issue here. HII is there to protect you, the owner of the property. It protects you for, amongst other things, situations where the builder might go bust, bankrupt or insolvent or provide faulty work. The builder – not you – must take out Home Indemnity insurance. And, the builder must also give you, the owner of the property, a copy of the certificate of insurance.
This must be arranged before the builder:
- asks the homeowner to pay a deposit
- commences work
- asks the homeowner to pay any money under a residential building contract.
What defines “residential building work”?
Legally speaking, residential building work is defined as any of the following:
- construction of a new dwelling
- renovation or extension of an existing dwelling
- placing a dwelling on land
- construction, extension or renovation of multiunit grouped homes except for some multi-story developments and fully leased retirement villages.
The builder’s duty & responsibility regarding Home Indemnity insurance
Before any contract is signed or money passes hand, it is a legal requirement that the builder provide the owner with a copy of the ‘Notice for the Home Owner’. This notice summarises the main requirements of the Act, which includes the requirement to take out Home Indemnity insurance.
Next, a copy of the certificate of HII policy, along with the application for a building permit is lodged by the builder with the permit authority. If there is evidence that HII is not provided, the permit authority is legally allowed to refuse the application.
Up to how much does HII cover?
Your Home Indemnity insurance policy provides you with good protection, as it covers the completion of your building work, without you having to pay any additional cost to the limit of $100,000 if the builder becomes insolvent, simply disappears or dies. However, this component of the policy does not apply to cost plus contracts.
In addition to the above, the policy must also cover all claims for defective workmanship for a period of six years from practical completion of that residential building work.
Have any questions?
If you have any questions about Home Indemnity insurance, or have recently lodged a claim due to problems with your current builder, please feel free to call one of our team at Mills Homes today. We’ll be happy to help clarify any concerns for you.