Builders Warranty Insurance (aka Domestic Building Insurance) covers domestic building work where the contractual cost of the job exceeds $16,000. This includes both labour and building material costs, so it is important to factor those in when enquiring about insurance. Domestic Building Insurance (DBI) is mandatory for all registered builders and trades-people for any domestic building project over $16,000. This applies to Owner Builders also.
Essentially, there’s four instances in which you are covered by Builders Warranty Insurance. You can make a claim if the builder is deceased, bankrupt, or has disappeared. You are also covered for policies issued after July 1, 2015, when your builder does not comply with a final order from the Victoria Civil and Administrative Tribunal (VCAT), or as a result of court proceedings.
As the owner of the property, if you decide to sell up any time up to six years after the building work, your DBI will cover the purchaser of that property up to that period.
First of all, it is important that you do not pay your deposit until the builder meets a number of conditions. If the builder does not volunteer all relevant information and documentation, there are three conditions that you need to confirm:
The limitation on claiming under DBI (or Builders Warranty Insurance) is up to six years. However, that period only covers any structural defects, for example, damage caused by defects in load-bearing structures.
For non-structural damage claims, the eligible period is only two years. Non-structural defects can include: defective brick work, plaster work, sticking doors/windows, etc. In both instances, a claim covers up to $300,000 in repair costs.
For incomplete work, you may be limited to 20%. In cases where the builder is still in business, the builder must complete or rectify any defects.
From May 31, 2010, the insurer is most likely to be the Victorian Managed Insurance Authority (VMIA). Any policy with an issue date preceding May 1, 2010, will not have been carried by the VMIA under any circumstances. However, the certificate of insurance may have the insurer listed, if the insurer is not the VMIA. If you cannot retrieve the insurer’s details from either the certificate of insurance or a building permit, the VMIA will have the insurer’s details listed on their database.
The VMIA does not issue DBI to non-eligible builders. The VMIA provides a search facility on their website, enabling you to check a builder’s eligibility (and also the property). You can also obtain insurance details with the VMIA.
The VMIA can assist you in a number of other ways, either via their website or over the phone. Knowing your rights, and the obligations the builder must fulfill under the policy, will ensure that you do not get any unwelcome surprises down the road. Please note: DBI system changes are planned for the latter half of 2017 – visit VMIA for more details.