If you’re a licensed builder or tradesperson in NSW, you need to get home building compensation (HBC) cover for each home building project over $20,000 including GST.
HBC cover, which used to be called ‘home warranty insurance’, protects homeowners as a last resort if you can’t complete building work or fix defects.
You need this cover to work directly for a developer, homeowner or owner-builder for new homes, new low-rise ‘multi-unit’ buildings of three storeys or less, or home renovations, unless exempt. Sub-contractors do not need the cover, because the head contractor has covered the work.
You must give proof of the HBC cover to your customer before starting work or asking for any payment or deposit.
Failing to take out HBC cover for such work is an offence under NSW law.
How to get HBC cover
Home building compensation cover is only available from a single provider operated by the NSW Government – icare HBCF. icare distributes its insurance product only through brokers it has approved and which are published on its website. There are no other licensed insurers or providers authorised to offer home building compensation cover in NSW.
You will need to apply for eligibility before you can buy HBC cover. You should not quote or contract for work that needs HBC cover unless you are eligible.
Once you have eligibility, you will need to buy HBC cover for each relevant home building project.
Building contracts and HBC cover
You must state the cost of HBC cover in your building contract.
Your contract must disclose the total amount of money that you had to pay for the cover (which may include brokerage, fees and taxes).
If you want to charge a margin to arrange the cover, you should not include that in the ‘cost of cover’ item. You can include it elsewhere in the contract.
If the contract will be signed before you buy the cover, it must include a reasonable estimate of what the cover will cost.
You should also ensure that your contract permits you to adjust the contract price to recover any difference between the actual cost of cover and your estimate. See for example the Variations clause in the NSW Fair Trading Home building contract template for work valued over $20,000.
Some industry associations also provide template contracts.