Each state government, except Tasmania, provides a safety net for homeowners faced with incomplete and defective building work carried out by a builder or tradesperson.
The administration of the scheme and policy terms are different in each state and these may be determined by the government or its agent – they are the sole underwriter and manage any claims. Ultimately, each state’s insurance cover varies in accordance with its legislation.
All licensed contractors directly contracting with homeowners and undertaking work that requires insurance cover, must obtain that cover before commencing any building work or taking any monies under contract – and that includes the deposit.
A risk assessment is required for all licensed contractors needing to obtain insurance cover, to determine their eligibility. This risk assessment and requirements also vary, depending on the respective state’s criteria. Once a licensed contractor is approved for insurance, a Certificate of Eligibility is issued setting out how much work they can accept annually, also the value and type of building works that they can undertake.
Once the licensed contractor has obtained a Certificate of Eligibility, they then can apply for a Certificate of Insurance for individual or multi-unit projects within their approved profile.
NSW Home Building Compensation Fund (HBCF)
In NSW a licensed contractor taking on residential work valued at over $20,000 is required to provide the homeowner with a HBCF insurance certificate (issued by icare HBCF) before starting any work or taking any monies under contract, including a deposit.
The HBCF insurance compensates homeowners for defective and incomplete building work by the contractor where they:
- become insolvent
- have their builder’s license suspended by NSW Fair Trading
The limits of HBCF coverage include:
- Major defects – provides cover for a period of six years after the completion of the work
- General defects – provides cover for a period of two years after the completion of the work
- Non-completion of building works – cover for a period of 12 months after the failure to commence, or cessation of the work
- The insurance covers up to a maximum amount of $340,000.
You can find more information on these websites:
You can calculate actual premium costs by icare HBCF for HBCF insurance, on this website
This premium calculator gives you an estimated cost of the total insurance premium payable by entering the following information:
- Correct construction type via drop down box
- Total contract value (GST inclusive)
- Postcode of works
- Estimated date of policy issue (important for correct calculations, taking into account premium increases at times in the future)
- Slider (this is moved based on the discount or loading applicable to what license you trade through and based on latest annual financial assessment carried out by the underwriter).
The premium calculated here will apply with any distributor/broker. There are no commissions paid by the insurer for this product.
Fees and charges
There is no commission paid by icare HBCF to distributors that undertake and assist with the facilitation of builders’ submissions for Certificates of Eligibility or the issuance of HBCF certificates of insurance.
Our fee structure to undertake the builders’ eligibility application and ongoing servicing will be provided upon submission.
Please contact Peter Allison with any questions on costs.
Building Contract Review Program (BCRP)
If the underwriter considers the builder does not have the experience to undertake the project proposed, the builder/company will be placed under the Building Contract Review Program (BCRP).
The icare website explains requirements for inexperienced builders placed under this program
For information on the general building work license, please visit NSW Fair Trading
- NSW Fair Trading – responsible for administering contractor’s license in NSW
- icare HBCF – the insurer providing builders with eligibility and HBCF certificates
- SIRA – NSW government agency responsible for managing compulsory statutory insurance
Please visit the Forms and resources for builders and homeowners page on the icare website for builder and distributor forms including:
- Project Application for CIMS All Work Excluding Multiple Dwelling Projects
- Project Application for CIMS Multiple Dwelling Projects
- Builder Project Completion Advice
- Builder Eligibility & Builder Profile Change Application