Domestic building insurance and insolvency

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Domestic building insurance

Domestic building insurance (also called builders warranty insurance) is taken out by a builder for you on works valued at more than $16,000.

Do not pay your deposit until:

  • the builder gives you the domestic building insurance policy and certificate of insurance that applies to your property. Certificates issued on or after 1 July 2015 are required to show the cost of the insurance premium
  • you contact the insurer to check the policy number is correct and applies to your home.

Domestic building insurance covers you if your builder:

  • dies
  • is insolvent
  • disappears.

If your policy was issued on or after 1 July 2015, it also provides cover if the builder fails to comply with a final order made by the Victorian Civil and Administrative Tribunal or a court.

Domestic building insurance covers costs up to $300,000 to fix:

  • structural defects, for six years
  • non-structural defects, for two years.

In all other cases, it is up to your builder to fix or complete works.

If you claim on the policy for work that was not completed:

  • you may find your claim limited to only 20 per cent of the contract price
  • the policy will not cover your advance payments.

For more information, contact the insurance provider.

Who provides domestic building insurance?

If your policy was issued on or after 31 May 2010, the Victorian Managed Insurance Authority (VMIA) may be the insurer. VMIA is a significant provider of Domestic Building Insurance in Victoria however, there are now a small number of other commercial providers.

If your policy was issued before 31 May 2010, the VMIA will not be the insurer.

If you cannot find the certificate of insurance, contact the builder/building surveyor or local council to find out the name of the insurer and the policy number. This is usually listed on the building permit.

For more information, visit Building insurance requirements - Victorian Building Authority.

Check if a builder is eligible for insurance

Domestic building insurance providers will only issue domestic building insurance to eligible builders.

To check if a builder is eligible, search online or contact the relevant provider. For VMIA visit Builder Search - VMIA.

Check domestic building insurance details for a property

You can request information about a particular property from the domestic building insurance providers. Search online or contact the relevant provider. For properties insured by VMIA visit Property Search - VMIA. Details include:

  • whether a domestic building insurance policy has been issued for the property since 1 July 2015
  • the policy number
  • the builder’s name
  • whether any claims have been made under the policy
  • the remaining balance of indemnity. 

Builder insolvency 

A builder cannot operate when insolvent. To find out if your builder is insolvent:

A builder in administration may not be insolvent and can continue to operate. The administration process will work out whether the builder is insolvent. ASIC and AFSA have registers of administrators and liquidators.

Voluntary administration

Builders who go into voluntary administration, but not liquidation, may continue to provide services to clients. You should contact the administrators for further advice on whether they are likely to wind the business up or allow it to continue to trade.

The builder or the administrators may ask customers to agree to a contract price increase, and possibly other changes to contract terms, for their build to be completed. This may be requested as part of an offer for a deed of company arrangement.

Customers are not obliged to accept revised offers or vote for a deed of company arrangement. If you are in this situation, you should seek financial and legal advice before deciding.

What to do if you suspect your builder is insolvent

If you suspect your builder is insolvent, seek legal advice and contact the Building Information Line on 1300 55 75 59 between 9:00 am and 5:00 pm, Monday to Friday (except public holidays). Calling this number costs the same as a local call. Additional charges may apply if you are calling from overseas, on a mobile, or payphone.

For more information on insolvency processes, visit ASIC and AFSA.

The cost of legal advice is likely to be much less than the cost of an uninformed decision. Seek legal advice before:

  • ending the contract with your builder and employing another builder.
  • paying subcontractors.

Insolvent builders and work over $16,000

You should be able to claim on the domestic building insurance policy (also known as builders warranty insurance) if the builder is insolvent. To make a claim: 

  • lodge your claim within 180 days of becoming aware of the builder’s insolvency
  • contact the insurer to lodge a claim. If you do not have a copy of the policy or certificate of currency, the builder, building surveyor or local council may be able to provide it. If not, you can contact insurance companies that provide domestic building insurance to check whether they issued insurance for your building.

If your insolvent builder does not have domestic building insurance for work worth more than $16,000, contact the Building Information Line on 1300 55 75 59 between 9:00 am and 5:00 pm, Monday to Friday (except public holidays). Calling this number costs the same as a local call. Additional charges may apply if you are calling from overseas, on a mobile, or payphone.

If the work required a building permit, seek legal advice on the building surveyor’s obligations to require a domestic building insurance (builders warranty insurance) certificate.

Insolvent builders and work worth less than $16,000

Builders are not required to have domestic building insurance for work under $16,000.

If the builder is in administration:

  • Contact the administrator or liquidator and submit a claim as an unsecured creditor.
  • Notices of administration often appear in the press or on the trader’s website.
  • ASIC or AFSA can provide administrator or liquidator details and have factsheets on insolvency procedures.
  • The insolvency process will determine whether you will receive any redress.
  • If you paid by credit card, contact your card provider and request a chargeback. For more information, view Chargebacks.

If the builder is not in administration, seek legal advice.