So, What Is Home Owners Warranty Insurance?

You might be asking yourself - do I need Home Warranty Insurance? The short answer is yes, you do - and here’s why…

Home Warranty Insurance, also known as a builder's warranty, statutory warranty, or a Home Owners Warranty, and is mandatory for builders and contractors when they’re constructing homes in NSW. The Home Building Compensation Fund (HBCF) protects homeowners by ensuring they’re not liable for paying out of pocket expenses for unfinished or defective work if their builder is at fault. That means that during the construction process or within a specified time after the completion, if your builder cuts corners and you’re left with defective or unsatisfactory building work, they go bankrupt, or they happen to disappear - Home Warranty Insurance will ensure you won’t be left footing the bill.

This insurance means that as well as having a certificate of eligibility for insurance with the HBCF, a builder must obtain a specific Home Owners Warranty certificate policy for each client, BEFORE signing the building contract. What you need to do is make sure that your builder produces this for your review before you go ahead and sign on that dotted line.

What Does Home Owners Warranty Insurance Cover?

The Home Owners Warranty not only makes good sense, it’s actually a legal requirement for all projects in NSW larger than $20,000, so builders stay on the right side of regulators and are held accountable for any problems or substantial delays. Building projects include new residential properties (houses, townhouses, apartments, and units), and homes that have undergone substantial renovating or alterations (something you should keep in mind if you are considering buying a first home that may be in dire need of a lot of renovation). Warranties are paid for by your builder, and they’re included in your purchase contract. The cost of this essential cover generally equates to 1-2% of your total contract value. Failure for the builder to take out HBCF cover is also an offence under NSW law.

And here’s what Home Owners Warranty insurance in NSW covers:

Failure for Your Project to Commence or be Completed

This could happen if your builder dies, becomes insolvent, disappears, or has their building licence suspended (by NSW Fair Trading due to non-compliance), you have 12 months to reclaim your deposit or a 20% refund on the amount in your contract.

Structural Defects

Including foundation problems, structural movement, and faults in load-bearing that ultimately affects the stability, safety, and integrity of your new home (within 6 years of the home being completed).

Non-Structural Defects

Any non-major issues that affect the liveability or functionality of your home, such as faulty plumbing, electrical problems, insufficient waterproofing, and defective doors or windows (within 2 years of building completion).

The Workmanship and Materials

If materials used during the construction process or the construction is shoddy.

The cost to the builder can vary depending on the property type, construction value, and locations. There may also be some exclusions and limitations regarding claims, so it’s a good idea to make sure you read the specific Ts&Cs carefully.

How to Ensure You’re Covered by Home Owners Warranty Insurance in NSW

As friendly as your builder might be, never simply take their word for it that they have organised this kind of cover. Make sure you read the building contract before you sign it, and pay attention to the clauses that explicitly state that your builder is to obtain and provide insurance. If your builder hasn’t done so already before you sign, ask if they provide Home Owners Warranty insurance in NSW and for the proof of coverage.

If your builder fails to provide you with their home builders warranty for your project, AVOID THEM!! The reality is that they will face some very serious legal consequences for not having it, including hefty fines, loss of their builder’s licence, and legal action by the NSW Government. If your builder doesn’t have home owners warranty insurance and it turns out that you do need to make a claim, you could end up having to take the legal route and see compensation through court - and that is only going to cause you a major headache.

It’s essential that you know your rights, so always ensure you get your Home Owners Warranty insurance in writing (it should be part of your contract). and make sure that it’s safely filed away for future reference.

If you do have concerns about the policy or if you aren’t sure if your home is covered, you can conduct a HBCF check yourself or seek legal advice from a construction lawyer.

Build a Beautiful Home With Eden Brae

It should take a weight off your shoulders knowing that a home builders warranty in NSW is usually certified by HIA, iCare or BuildSafe – all peak industry bodies whose job it is to ensure that builders abide by the rules, and families aren’t left out of pocket or without a roof over their heads.

If you’re ready to get building on your new home, get in touch with our Eden Brae team today by calling 1300 645 860. You’ll also find some great resources on our website, like budgeting for a first home and information on the first home buyers grant.

By partnering with a highly trusted and reputable major builder like Eden Brae Homes, you can rest assured that our Home Warranty Insurance is firmly in place, plus we have our Buildsure Guarantee to protect you in even more ways.