Everything You Need to Know about Home Owner’s Warranty Insurance
If you are planning on undergoing any home renovations you’ll want to understand Home Warranty Insurance. This insurance protects the consumer from any financial loss that is caused by a builder’s failure to fix or compensate for any poor, defective, or incomplete building work.
How Does it Work?
Formerly known as the Home Warranty Insurance Scheme, the Home Building Compensation fund needs to be taken out by any builder, tradesperson or developer entering into a residential building contract where the contract price is over $20,000 (including an owner-builder).
This insurance must be taken out before any money (including a deposit) changes hands. If the contract price does not exceed the $20,000.00 but is valued at more than $5000, there is no legal requirement for the builder to take out insurance. The contractor, however, still must hold an appropriate licence with Fair Trading.
What Purpose Does This Insurance Serve?
This home owner’s insurance is designed to cover you for losses caused by defective or incomplete work in the event of the death, disappearance or insolvency of the contractor.
It is provided for up to 6 years from the date of completion of the work for major defects in industrial building work and 2 years for other losses.
What Happens If You Have a Problem with Building Work?
If you are concerned about defective or incomplete building work and are unable to locate your builder, your first step is to lodge a complaint with Fair Trading. If the builder or contractor is unable to be located and/or is unable to rectify the work, you will be provided with a letter that can be used to make a claim under the Home Building Compensation Fund.
Ask about Insurance before You Begin Work
It is your builder or contractor’s responsibility to arrange for the home owner’s insurance to be taken out. You should not assume this has been done on your behalf. Ask your potential builder or contractor for details of the home warranty insurance policy. If they don’t have the information or are unwilling to divulge the details, you should think very carefully before proceeding.
Also be wary of contractors or builders that try to “split” the home warranty insurance contract. “Splitting” the contract will bring the price under the $20,000.00, which is highly illegal.
Check the Status of License
Always check the status of your contractor’s licence with the Department of Fair Trading and read every item in your contract before you sign. Ask for more details if there are areas you don’t understand or obtain independent legal advice if you are unsure ”“ it always pays to double check the details.
For more information about home owners insurance and our policies, get in touch with Nouvelle Kitchens & Bathrooms in Sydney.