What does owner builder construction insurance cover?

Owner builder construction insurance, also known as contract works insurance, protects the actual building project during construction or renovation. It typically covers damage to the structure itself from events like fire, storm, flood, vandalism, collapse and accidental damage. This cover can also extend to materials on site, temporary structures and often includes public liability for accidents involving third parties on the site.

Is owner builder insurance mandatory?

The mandatory nature of owner builder insurance varies by state and territory. While specific types of insurance such as builders warranty insurance are legally required when selling a property built by an owner builder within a certain timeframe, general owner builder construction or public liability insurance may not always be a direct legal requirement for commencing work. However, some states, like Tasmania, require specific liability and construction cover to obtain an owner builder permit. Lenders will almost certainly require you to have comprehensive owner builder insurance in place before they approve financing for your project. It's best to check the specific regulations in your state or territory and consider the significant financial risks involved without adequate cover.

What happens if I do not have owner builder insurance?

Without owner builder insurance, you assume full financial responsibility for any unforeseen incidents that occur during your construction or renovation project. This means you would personally bear the cost of repairing damage to the building materials or the structure itself from events like fire, theft or natural disasters. Without public liability insurance, you could be held financially accountable for injuries sustained by visitors or workers on your site or for damage caused to neighbouring properties. This could lead to significant financial hardship, legal disputes and project delays.

What are the common exclusions in owner builder insurance policies?

Owner builder insurance policies typically have exclusions which limit the cover provided. Common exclusions include damage caused by faulty workmanship or defective materials, pre-existing structural defects, cosmetic damage, wear and tear, rust, corrosion, rot, mould or infestations. Policies may also exclude loss or damage due to war, terrorism, nuclear events or illegal acts. It is crucial to carefully read thet PDS of any policy to understand exactly what is and is not covered.

How long does owner builder insurance last?

Owner builder construction insurance policies are typically project specific and cover the duration of your building or renovation project. The policy period is usually agreed upon when you take out the cover, based on your estimated completion date. It is important to ensure your policy extends until the project is fully completed and handed over, or until any required council inspections are finalised. If your project is delayed, you may need to extend your policy which could incur additional costs.

Can I get owner builder insurance if I am using a project manager?

Yes, in most cases you can still obtain owner builder insurance even if you engage a project manager. An owner builder is typically defined by who holds the overall responsibility and risk for the project, not necessarily who performs all the physical work or manages every single detail. If you, as the property owner, are ultimately responsible for decision making, contracts with subcontractors and the financial aspects of the build, you would still be considered an owner builder. Your project manager would assist you in fulfilling these responsibilities, but you would retain the primary owner builder status and the need for appropriate insurance.

What is the difference between owner builder insurance and a registered builder’s insurance?

The main difference lies in who the policy is designed to protect and who holds the primary responsibility for the construction project. Owner builder insurance is specifically tailored for individuals who are personally managing their own building or renovation projects on their property. It covers the owner builder's unique risks including property damage during construction and public liability on site. In contrast, a registered builder's insurance, such as Contract Works Insurance and Public Liability Insurance, is taken out by the professional builder. This covers their business operations, their employees and their projects, transferring the primary risk from the homeowner to the builder. While some aspects of cover may seem similar, the policy holder and the scope of responsibility differ significantly.

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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?

Owner builder insurance is a type of insurance designed specifically for individuals who are building or renovating their own property without hiring a licensed builder.

Insurance can be good to have because you face the same risks and need for insurance as a registered builder.

Who’s classified as an owner builder?

An owner builder is someone who takes on the responsibility of managing and overseeing a construction or renovation project on their own property. Owner builders can be individuals who own the land on which the construction or reno is taking place, property investors who plan to work on and then sell the property, and sometimes developers too.

How does owner builder insurance work in different states of Australia?

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

State	Insurance requirements during building	Your insurance requirements when selling the property
NSW	Builders, 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.
Victoria	Builders, 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.
Western Australia	Builders, 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.
South Australia	Any 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.
Tasmania	To 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/A

What insurance do I need to build, renovate or alter my home?

You typically need to take out some form of builders insurance if the renovation or construction costs more than a specific amount – for example, $20,000 in NSW.

Workers compensation insurance

This is likely to be the only compulsory form of insurance you'll need. For example, you probably won't need workers compensation insurance since it's likely you're only engaging with contractors.

Public liability

It's unlikely that you'll be required to have public liabilty insurance because it's your worksite. Some make public liability insurance compulsory for workers to be allowed on site. However, it's might be included with your builders insurance policy. If not, then you should consider taking out cover.

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.

Talk to a broker about owner builder insurance

Frequently asked questions

Owner builder construction insurance, also known as contract works insurance, protects the actual building project during construction or renovation. It typically covers damage to the structure itself from events like fire, storm, flood, vandalism, collapse and accidental damage. This cover can also extend to materials on site, temporary structures and often includes public liability for accidents involving third parties on the site.
The mandatory nature of owner builder insurance varies by state and territory. While specific types of insurance such as builders warranty insurance are legally required when selling a property built by an owner builder within a certain timeframe, general owner builder construction or public liability insurance may not always be a direct legal requirement for commencing work. However, some states, like Tasmania, require specific liability and construction cover to obtain an owner builder permit. Lenders will almost certainly require you to have comprehensive owner builder insurance in place before they approve financing for your project. It's best to check the specific regulations in your state or territory and consider the significant financial risks involved without adequate cover.
Without owner builder insurance, you assume full financial responsibility for any unforeseen incidents that occur during your construction or renovation project. This means you would personally bear the cost of repairing damage to the building materials or the structure itself from events like fire, theft or natural disasters. Without public liability insurance, you could be held financially accountable for injuries sustained by visitors or workers on your site or for damage caused to neighbouring properties. This could lead to significant financial hardship, legal disputes and project delays.
Owner builder insurance policies typically have exclusions which limit the cover provided. Common exclusions include damage caused by faulty workmanship or defective materials, pre-existing structural defects, cosmetic damage, wear and tear, rust, corrosion, rot, mould or infestations. Policies may also exclude loss or damage due to war, terrorism, nuclear events or illegal acts. It is crucial to carefully read thet PDS of any policy to understand exactly what is and is not covered.
Owner builder construction insurance policies are typically project specific and cover the duration of your building or renovation project. The policy period is usually agreed upon when you take out the cover, based on your estimated completion date. It is important to ensure your policy extends until the project is fully completed and handed over, or until any required council inspections are finalised. If your project is delayed, you may need to extend your policy which could incur additional costs.
Yes, in most cases you can still obtain owner builder insurance even if you engage a project manager. An owner builder is typically defined by who holds the overall responsibility and risk for the project, not necessarily who performs all the physical work or manages every single detail. If you, as the property owner, are ultimately responsible for decision making, contracts with subcontractors and the financial aspects of the build, you would still be considered an owner builder. Your project manager would assist you in fulfilling these responsibilities, but you would retain the primary owner builder status and the need for appropriate insurance.
The main difference lies in who the policy is designed to protect and who holds the primary responsibility for the construction project. Owner builder insurance is specifically tailored for individuals who are personally managing their own building or renovation projects on their property. It covers the owner builder's unique risks including property damage during construction and public liability on site. In contrast, a registered builder's insurance, such as Contract Works Insurance and Public Liability Insurance, is taken out by the professional builder. This covers their business operations, their employees and their projects, transferring the primary risk from the homeowner to the builder. While some aspects of cover may seem similar, the policy holder and the scope of responsibility differ significantly.

Sources

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Written by

Gary Ross Hunter

Journalist

Gary Ross Hunter has over 6 years of expertise writing about insurance, including life, health, home, and car insurance. Having reviewed hundreds of product disclosure statements and published over 800 articles, he loves simplifying complex insurance topics for everyday readers. Gary has contributed to major outlets like Yahoo Finance, The Sydney Morning Herald, and news.com.au, and holds a Bachelor of Arts (Honours) in English Literature from the University of Glasgow, along with a Tier 2 General Advice certification, ensuring his work adheres to ASIC’s RG146 standards. See full bio

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Owner Builder Insurance

Owner builder insurance is for people who own and plan to be the main builder on the property. You can buy standalone cover or combine with other insurances.

Key takeaways