If you are undertaking significant renovations to your home, you should check that your builder and allied trades have a range of different insurance policies before you sign any contract or pay a deposit.
If they don’t have one or more of these policies, you may be liable in a number of situations. For example, if someone enters your home and is injured due to the building work, or if one of your builders or tradespeople is hurt in an onsite accident.
Here’s the key policies that should be in place:
Home Building Compensation (HBC) Scheme
HBC cover – known as Home Warranty Insurance until January 2015 – protects NSW homeowners as a last resort.
Homeowners can claim 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.
Builders are required to take out this insurance on a project-by-project basis for all work that comes to more than $20,000 including labour and materials.
The builder or tradesperson must show you that they have valid HBC cover before you pay them any money, including a deposit, and before they start work on your project.
The NSW State Insurance Regulatory Authority (SIRA) regulates Home Building Compensation cover and they have recently released an online tool to check if your builder has HBC cover.
Public Liability Insurance
Your builder or tradesperson should have Public Liability Insurance to ensure they are covered if anyone is injured as a result of the building work on your home.
If they don’t have Public Liability Insurance, as the homeowner, you could be the person held liable.
This covers accidents to people other than those working onsite who should be covered by Workers’ Compensation Insurance.
Workers’ Compensation Insurance
Workers’ Compensation Insurance ensures all employees working on your renovations are covered by your builder in case they are injured when working on your home.
If your builder doesn’t have Workers’ Compensation Insurance, once again, you could be liable to pay the costs of a claim. This is because in some circumstances under the Workers Compensation Act 1987, people working on your home are regarded as your employees.
One important thing to note is that a builder or tradesperson who doesn’t operate under a trade or company name cannot take out Workers’ Compensation Insurance to cover themselves. In this situation you should have your own minimum premium insurance just in case.
Contact the NSW State Insurance Regulatory Authority for more information on Workers’ Compensation Insurance or names of companies who provide this type of insurance.
Contract Works Insurance
A builder or tradesperson should have Contract Work Insurance that will protect you – and them – if there is loss, theft or damage to materials and work.
If your builder doesn’t have Contract Work Insurance, you may be affected in a number of ways including delays to the completion of your project, or even disputes about who is liable if materials are damaged or stolen.
Professional Indemnity Insurance
Professional Indemnity Insurance is designed to protect consultants and businesses that give professional advice or provide services to clients.
In the context of building work, that can mean services such as advice, design, certification, contract administration and project management.
So, this should be insurance taken by people such as building certifiers, architects, engineers and building consultants.
Other Advice for Homeowners
When undertaking any building work, it’s a good idea to:
- Check with your home insurer before you sign a building contract and make sure everything is in writing, so you have a paper trail;
- Check if your home and contents insurance would cover damage or theft to your home during construction;
- Inform your lender about any building work, especially if borrowing money to fund the project. They are likely to want to see a current certificate of insurance to make sure you (and they) are protected;
- Increase the value of your home insurance policy if the building work is likely to raise the value of your home;
- When checking insurance certificates supplied by your builder, ensure the builder’s name on the certificates matches the name on the building contract and the builder’s licence.
Some thorough checking before you sign contracts and before you commence building work is vital to ensure that, in any unfortunate circumstances, you are covered and confident that you won’t face unexpected and large bills.
Thinking about making major renovations to your home in Sydney? The Addbuild team is ready to apply the benefit of our 40 years of experience to help you design and build your dream home. Contact us by calling (02) 8765 1555 or use our online form.