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Owner Builder Insurance

Owner builder insurance can cover losses during the building process. You can buy a standalone package or combine with your other insurances.

What you need to know

  • There are three main types of owner builder insurance you need to consider: Owner Builder Construction Insurance, Public Liability Insurance and Builders Warranty Insurance.
  • It is possible to take out separate policies if you do not want cover for everything.

How much does owner builder insurance cost?

The cost of owner builder insurance is not fixed and needs to be calculated on an individual basis. However, there are certain factors considered by insurers when determining an appropriate premium. These factors include:

  • Type of building. The size and nature of your building will affect the costs of owner builder insurance. The materials used in construction also affect the price you pay.
  • Location. Where your building is located can affect your premium. The specific nature of your building site may also affect the insurance cost.
  • Quality of cover. You always get what you pay for. A really cheap insurance policy will often fail to cover you for everything you need when things go wrong.
  • Extent of construction. Building a completely new structure will cost more in insurance terms than a partial renovation.

Is it compulsory to have owner builder insurance?

While it’s not mandatory to take out owner builder insurance in Australia, this type of cover is definitely worth considering before you begin your building project. From fire and storm damage to theft and vandalism, damage to your project can occur through no fault of your own and could lead to significant expenses.

Similarly, a building site features a range of hazards and risks that would not normally be present at your property, and if they result in property damage or bodily injury to a third party, a public liability claim brought against you could lead to disastrous financial consequences.

Who is actually recognised as an owner builder?

Each Australian state and territory has its own legislation on exactly who constitutes an owner builder, so it’s important to familiarise yourself with the relevant legislation where you live for full details. But as a general rule, an owner builder is someone who constructs or renovates a residential building on their own land, and who is not otherwise employed as a builder.

Owner builders basically act as the general contractor for their building project, hiring out work to subcontractors across a range of trades. They’re also responsible for the building schedule and assume any liability associated with the project, which means they assume all the responsibilities (and associated risks) that a registered builder would normally take on.

State-by-state insurance requirements

Regardless of state, it's good practice to consider insurance like workers compensation and public liability to cover injuries and incidents on the site. However, there are seperate requirements by state to understand:

  1. Contractors need insurance in case they die, disappear or declare themselves bankrupt.
  2. You may need insurance if you sell your property.
StateInsurance requirements during buildingYour insurance requirements when selling the propertyMore info
NSWBuilders, contractors or tradespersons must have home building compensation (HBC) cover for jobs costing more than $20,000. This covers incomplete work.If you selling a house within 7 years and 6 months: You must include a 'consumer warning' in the sale.Learn more
VictoriaBuilders, contractors or tradespersons must have domestic building insurance for jobs costing more than $16,000. This covers incomplete work.If you selling a house within 6 years and 6 months: then an owner builder must have domestic building insurance that covers for issues with the building.Learn more
Western AustraliaBuilders, contractors or tradespersons must have home indemnity insurance for jobs costing more than $20,000. This covers incomplete work.If you selling a house within 7 years: then an owner builder must have home indemnity insurance that covers the purchaser for issues with the building.Learn more
South AustraliaAny building work contractors must take out building indemnity insurance for work costing $12,000 or more to cover completion of work e.g. this covers incomplete work.Claims can be made up to 5 years from the date building work is completed. So it's a good idea to ensure there is building indemnity insurance if selling within 5 years of the building work being completed.Learn more
TasmaniaTo get an owner builder permit you're required to have liability insurance for personal and property damage on the site and construction liability cover for damage to the property where the owner builder has legal control of the premise the premise. The minimum amount of cover is $5 million.N/ALearn more

What types of owner builder insurance are there?

InsuranceWhat it coversApply
Owner Builder Construction InsuranceLosses during the building process including malicious damage/vandalism, theft, fire damage, storm and wind/water damage.Speak to a broker
Public Liability InsurancePersonal injury and to third parties and property damage e.g. someone getting injured on site.Speak to a broker
Builders Warranty InsuranceDefective or incomplete work e.g. if the builder becomes bankrupt. Note: In some states you may not be able to access this as an owner builder.Speak to a broker

If you are an owner builder undertaking your own building project, you will no doubt be hiring some heavy machinery during the construction process. For this reason, you will need to take out Construction Insurance in case the equipment you are using is damaged, stolen or breaks down.

What's covered?

Construction Insurance covers the materials and equipment being used and stored on your building site and usually includes a Liability component to cover you if you injure others or damage third party property while operating your machinery.

As well as covering theft or vandalism of materials and equipment from your site, Construction Insurance policies also often cover electrical or mechanical breakdown of plant and equipment and will compensate you for repairs and any replacement hire costs you incur.

Construction insurance can provide financial protection against a wide range of potential risks faced by owner builders, including:

  • Malicious damage or vandalism to the project or property
  • Theft of goods or materials
  • Fire damage
  • Storm, wind and water damage

If one of the above insured events occurs, the most the insurer will pay is the full replacement cost for the insured project as shown on your policy schedule. Most insurers will also pay for a range of additional expenses when an insured event occurs, including:

  • The removal of debris
  • Demolition and disposal of the damaged building works or pre-existing structure
  • Demolition and removal of undamaged parts of the project to allow the project to be reinstated or repaired
  • Professional fees

Can it be used for multiple projects?

Construction Insurance policies are available for single as well as multiple projects and, given that owner builders expose themselves to the same risks as regular builders, it makes good sense to take out this form of insurance in conjunction with Builders Warranty Insurance.

If you’re an owner builder and a member of the public suffers an injury or property damage as a result of the work you are undertaking, an expensive public liability claim could be made against you. Renovations and building works mean that a property is prone to a range of hazards that would not normally be present. Public liability insurance covers third party injury and property damage caused by your negligence, offering crucial protection for your financial wellbeing.

Public liability insurance covers the following losses for owner builders:

  • Damages and compensation resulting from third party injury or property damage
  • The costs and expenses of your legal defence
  • The claimant’s legal costs and expenses for any successful public liability claim against you
  • Public liability for physical damage to or destruction of goods that are in your possession or control, and which arises as though the damage or destruction was damage to property

Cover is provided up to the limit of indemnity for public liability shown in your policy documents, with $5 million a commonly listed coverage limit.

What is Builders Warranty Insurance?

Builders Warranty Insurance is compulsory insurance everyone carrying out residential building work must obtain. In the case of a contract builder hired for a job, it covers the homeowner for a six year period against financial losses resulting from the builder failing to rectify or compensate for defective or incomplete work.

In the case of an owner builder, it covers anyone who purchases the home within that six year period. The period of cover is from the date of acquiring an occupancy permit or certificate of final inspection and is six years for structural defects and two years for non-structural defects.

However, the insurance cover only applies if the builder dies, disappears, becomes insolvent or bankrupt during construction or within the set time frames. So disputes regarding defects that aren’t covered would need to be resolved directly between the owner and the builder or between the owner builder and the purchaser.

Builders Warranty Insurance is only required if the residential building work exceeds a certain cost, an amount which varies by state. In SA and the ACT that amount is $12,000, in Victoria it is $16,000 and in NSW and WA it is $20,000.

Can I get cover if I have already started construction?

Unfortunately, many insurers will not be willing to provide owner builder insurance cover if you have already started your construction project. With this in mind, it’s recommended that you find the right owner builder insurance policy before starting work, especially if you are relying on financing from a lender to complete the project – without the proper insurance in place, you may have trouble finding a lender who will let you borrow the funds you need to finish the construction.

There are some insurers that may offer you cover for projects that have already commenced, but the cover will typically cost more than it would have if you had taken out a policy before starting work.

Talk to a broker about owner builder insurance

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If you are ready to speak with a consultant about different business insurance options available, simply enter your details in the form. Keep reading if you want to learn more about the different types of cover available.
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