Home indemnity insurance – a reminder about your obligations
Residential building work over $20,000 must be covered by home indemnity insurance (HII) which protects owners against the risk of losing the deposit or other financial loss if the builder cannot complete the work or meet a valid claim for faulty or unsatisfactory building work because of a ‘relevant circumstance’ exists in relation to the builder.
A relevant circumstance can occur if:
- the builder is an individual and the builder dies, disappears or becomes insolvent; or
- the builder is not an individual, such as a corporation, and the builder ceases to exist or becomes insolvent.
A ‘relevant circumstance’ can arise if the State Administrative Tribunal (SAT) cancels a builder’s registration or the Building Services Board (BSB) does not renew such a registration. In this ‘relevant circumstance’, cancellation by the SAT or non-renewal by the BSB must have occurred because the builder failed to satisfy the financial requirements prescribed in regulations under the Building Services (Registration) Act 1991 (WA).
Residential builders, owner builders and permit authorities are reminded about their obligations and duties under the Home Building Contracts Act 1991 and related legislation regarding HII which include:
At the residential building contract stage
Before undertaking residential building work valued over $20,000 builders must:
- obtain a HII certificate of insurance for the proposed work before claiming any payment from the owners or commencing work under the contract and provide a copy to the:
- owner; and
- permit authority as part of the building approval process.
Note: The Building and Energy can advise of approved HII providers. Builders who fail to obtain HII as required risk substantial penalties and disciplinary proceedings.
At the building permit application stage
Before granting a building permit for residential building work valued over $20,000, the permit authority must ensure that:
- a HII certificate of insurance for the proposed work has been submitted by the builder;
- the HII certificate of insurance is watermarked (see example below);
- the Certificate of Insurance provided was issued by QBE and the details on the certificate match with the QBE's records on the Builders Warranty Insurance Certificate Register; and
- ensure that the builder has not provided a copy of other insurance documents such as a certificate of HII eligibility or the builder’s construction/public liability insurance certificate instead of a HII certificate of insurance.
- where a builder is claiming an exemption from obtaining HII under the provisions of the Home Building Contracts (Home Indemnity Insurance Exemptions) Regulations 2002, check with the Building and Energy if there is uncertainty as to whether the project is exempt under those regulations; or
- in relation to building their principal place of residence, check with the Building and Energy that a statutory declaration has been made by the builder to the Building Commissioner verifying that he or she has not within the last six years obtained a building permit for residential building work for which no insurance was required (section 25(B)(3) of the Home Building Contracts Act 1991).
- should be aware that before a contract for home building work is signed or a deposit is paid, the builder is required to provide the owners with a copy of the “Notice for the Home Owner” (i.e. Schedule 1 - Home Building Contracts Regulations 1992) which summarises the main requirements of the Home Building Contracts Act 1991 and the requirement to obtain HII;
- that the builder is required to provide a copy of the HII certificate of insurance to the owners; and
QBE Insurance has published a Builders Warranty Insurance Certificate Register which can be used to confirm that the Certificate of Insurance your builder provided was issued by QBE. You can use the register to match the details on your Certificate with the QBE's records.
- must obtain HII if they wish to sell their property within seven years from the time the building permit was granted. The HII certificate of insurance must be provided to the prospective purchaser of the home before settlement occurs.
Where there is a change of builder during construction and before the completion of the works, for which the building permit was granted, the proposed new builder must obtain a HII certificate of insurance for the proposed building work, or the stage of building work required, and provide a copy to the owner.
It is advisable for the new builder to also provide a copy of the HII certificate of insurance to the permit authority.
Owners are encouraged to check that the new builder has HII in place for their residential building work and has given them a copy of the HII certificate of insurance.
Evidence of home indemnity insurance
The following is an example of a HII certificate of insurance. Approved insurance providers began watermarking these certificates in 2016.
HII is not required for associated work performed alone under separate contracts such as installation of a swimming pool, carport, and pergola or landscaping.
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