Home Builders Insurance

9 November 2025 in Building and Construction Law | 6 min read | skip to FAQs

This article provides an overview of the insurance requirements for home builders. These requirements are set out in the Home Building Act 1989 (NSW) (HBA).

Overview

The general rule, as set out in section 92 of the Home Building Act 1989 (NSW), is that builders performing residential building works must have insurance. Specifically, the builder must obtain a contract of Home Building Compensation (HBC) insurance, that

1. Complies with the terms of the Home Building Act 1989 (NSW);
2. Is in force in relation to, and during the course of, the building works;
3. Is in the name of the builder, who must provide
4. An authorised certificate evidencing the contract to the homeowner.

Home building compensation insurance was formerly called Home Warranty Insurance. It is also known as Home Building Compensation Fund cover (HBCF).

Residential Contracts Excluded from Section 92 Requirements

1. If the price of the residential build doesn’t exceed $20,000.00, as set out in section 53 of the Home Building Regulation 2014 (NSW);
2. Where the price is unknown, and the reasonable market cost of the labour and materials doesn’t exceed $20,000.00 (section 92(3) of the HBA); or
3. For work set out in Division 6 of the Home Building Regulations 2014 (NSW). Of particular importance is section 56 of the Home Building Regulation 2014 (NSW) that provides an exemption for contracts for multi-storey buildings that is defined as buildings of more than three storeys and two or more dwellings. The Opal Tower and Mascot Towers developments are examples of multi-story buildings that were not insured.

What are the Home Builders Insurance Requirements?

The requirements for a contract of insurance are outlined by section 99 of the Home Building Act 1989 (NSW):

1. The contract must insure the homeowner, on whose behalf the building works have been done, against any risk of loss arising from building defects and of non-completion of the works;
2. The contract must insure both the owner and those who subsequently purchase the property, known as successors in title.
3. In the event that the home owner can’t make a claim against the builder due to the builder’s insolvency, licence suspension, death or disappearance, the home owner is entitled to make a claim against the Home Builders Compensation insurance.

The only insurance provider who currently issues insurance contracts in compliance with the requirements of the Home Building Act 1989 (NSW) is the NSW government insurance provider Icare.

Non-Contracting Homeowners Also Benefit

Where only one homeowner of the property in question has entered into a contract with the builder, and the insurance provides cover for that homeowner, this same benefit is also conferred on all other homeowners who are not a party to the residential building contract. This is pursuant to sections 99 (2A) and 92C of the HBA. This is the case, even if the contract of insurance does not make any mention of conferring a benefit to the other homeowner(s).

Period of Cover

The contract of insurance must provide cover for loss arising from the:

1. Non-completion of the work for 12 months either following the failure of the builder to commence the works, or from the date of cessation of the works;
2. Losses arising from any major defects for six years from the date of completion;
3. Losses arising from any other, otherwise known as minor defects, for two years from the date of completion, (section 103B of the HBA).

Owner-Builders

Where an owner-builder enters into a contract with a sub-contractor to do residential building work, the owner-builder has the same insurance obligations as a builder, (section 92(6) of the HBA). However, a contract of insurance cannot be issued to an owner-builder if no sub-contractors have been employed during the residential building works, (section 95(1) of the HBA).

It should be noted that a homeowner of a property where an owner-builder permit has not been issued, must include a conspicuous warning that an owner-builder permit has not been issued if selling the property. This must include the date, and state that the work done under that permit was not required to be insured under the HBA.

Developers

A Developer, if selling property on which residential building works have been performed on their behalf must attach the certificate of insurance, obtained by the builder who performed the work, to the contract of sale, section 96A of the HBA.

Insurance

Builders must provide the insurer with the following particulars:

1. The identity of the builder and the homeowner who is party to the residential building contract, section 92A of the HBA.;
2. The address of the property where the residential building work is to be conducted, section 92A of the HBA; and
3. The contact details of the homeowner, (section 46A of the HBA).

Providing a Certificate of Insurance to the Homeowners

The builder must provide the homeowner(s) with a copy of the certificate issued by the insurer prior to commencing the works, (section 92(1)(b) of the HBA). Residential building contracts will also generally allow the homeowner the right to request a copy of the certificate of insurance from the builder any time after the commencement of the building works.

The following website link enables a home owner, or any other person, to check that there is a contract of Home Building Compensation Cover in place https://verify.licence.nsw.gov.au/home/HBCF

Consequences of not Obtaining Insurance

A Builder must not demand or receive a payment under a residential building contract (whether it be a deposit or other payment and whether or not residential building work under the contract has commenced) from the homeowner(s) unless:

1. A contract of insurance cover that complies with the HBA is in force; and
2. A certificate evidencing the contract of insurance, in the approved form, has been provided to the homeowner(s), section 92(2) of the HBA.

The Builder is also not entitled to damages, or to enforce any other remedy in respect of a breach of the residential building contract by the homeowner(s) and is not entitled to recover money regarding the building works under any other right of action including quantum meruit, (section 94(1) of the HBA).

This was illustrated in the case of Syed Ahmad Shoaib Ali Pty Ltd v Jandson Pty Ltd; Jandson Pty Ltd v Syed Ahmad Shoaib Ali Pty Ltd [2018] NSWCATAP 228 at [142]-[149], [327]-[334]. This found that because the builder was unable to rely on the contract, the builder was unable to retain the deposit.

There is, however, an exception where if a court or tribunal considers it just and equitable, the builder, despite the absence of the required contract of insurance, will be entitled to recover money in respect of the works performed, on a quantum meruit basis, section 94(1A) of the HBA. For more information about a claim of quantum meruit generally, please see our informative article on Quantum Meruit in Construction Law.

What are the penalties for Non-Compliance with Home Builder Insurance?

For non-compliance with the insurance requirements of section 92 of the Home Building Act 1989 (NSW) a maximum penalty of 1,000 penalty units apply in the case of a corporation and 200 penalty units for an individual, section 92 of the HBA.

Key Takeaways

1. Home Builders Insurance Requirements

Builders must have valid home building compensation (HBC) insurance and provide the homeowner with a certificate before starting residential work, unless the contract is under $20,000 or for a multi-story building.

2. Coverage of Home Builders Insurance

HBC insurance protects homeowners and successors from loss arising from a major defect for six years and minor defects for two years from completion of the build. Where recovery from the builder is not possible due to a builder’s insolvency, death, or disappearance the home owner is entitled to make a claim against the HBC.

3. Developers and Home Builders Insurance

Developers must ensure that home building insurance is in place and that the certificate of compliance is attached to the contract for the sale of property

4. Owner-Builders and Home Builders Insurance

Where an owner-builder enters into a contract with a sub-contractor to do residential building work, the owner-builder has the same insurance obligations as a builder. However, if no sub-contractors are employed, a contract of insurance can’t be issued to the owner-builder. Moreover, when selling the property the owner must display this information in the contract for sale.

5. Noncompliance Penalties

Without the required insurance, builders cannot claim payments or damages. Breaches attract heavy penalties of up to 1,000 penalty units for corporations and 200 for individuals.

How can BSM Sydney Lawyer assist you?

The construction lawyers at Brander Smith McKnight Sydney Lawyers have over three decades of experience in building and construction. Our team of construction lawyers remain up to date with the latest legislation and have extensive experience in home building compensation insurance, particularly disputes. The lawyers are skilful negotiators and use a wide range of alternative dispute resolution methods to avoid litigation. If litigation is required, the building and construction lawyers at BSM Lawyer Sydney have outstanding advocacy skills and experience in all tribunals and courts, including NCAT, the Local Court, District Court and Supreme Court. We believe in continuing negotiation with the other side even if litigation has commenced. This can save you time, money and stress. The senior building and construction lawyers at BSM Lawyer Sydney provide a free 20-minute consultation.

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