Builders’ Insurance: What Your Business Needs To Know

Australian builders are experiencing slim margins, but to help with costs, it pays to have a tight rein on your risk management.

We’re not quite seeing what’s happening in the UK, where builders are pulling in the profits, charging about a 10% premium over the price of an existing home.

Back in Australia, you do have some solid choices of insurance coverage to help protect your business against risks, though. There’s a range of coverage that is legally or contractually required, while others are additional useful protection. Knowing the main types of insurance and the rules around them can be a major factor in your business’ success and safety.

Builders’ warranty insurance

Each Australian state and territory has its own regulations for builders’ warranty insurance (also known as home warranty insurance), so these policies may have a slightly different name in your jurisdiction. Builder’s warranty insurance aims to provide a level of security to homeowners should a builder not be able to finish a new build, renovation or fix faulty work. This insurance typically covers work starting from $12,000. In some specific cases, if your project’s value falls in this bracket, you’ll need a certificate of insurance before the relevant local council issues a work permit for work to start.

For a particular project, this policy is usually required to be taken out by builders at the time of entering a building contract with a homeowner. The policy typically covers:

• The death of a licenced builder

• The disappearance of a licenced builder

• The insolvency or bankruptcy of a builder

This coverage covers your clients once the building passes its final check or gets its occupancy permit. Depending on the state or territory in which you’ve built, coverage could be six years for structural defects and two years for other defects (non-structural).

This policy covers the homeowner, but you’ll need a different policy to protect you and your business.

Builders’ insurance (builders’ liability insurance)

Another policy sometimes confused with builders’ warranty insurance is builders’ risk or builders’ liability insurance. That’s the coverage that protects your structure during construction. This insurance coverage initiates as the project begins and lasts throughout the construction phase, concluding when the project is fully completed and ready for use. Builders generally select a package of policies for builders’ risk insurance to protect against theft, property damage, weather-related issues, and more.

Contractors insurance

Another key coverage type, contractors insurance (contractors general liability insurance), protects everyone involved in the construction project.

A standard contractors general liability policy offers coverage for a variety of risks. This includes handling costs related to property damage, bodily harm, and issues arising from personal or advertising offenses.

Workers’ insurance

As an employer, you’ll also want to understand and obtain workers’ compensation insurance, which covers costs for medical expenses, loss of earnings, or rehabilitation costs for employees who are injured or made sick due to their work.

It makes sense to combine policies into a customised package to help keep your business on track. Reach out to us to guide you on best practice risk management.