Information for licensees

On 8 November 2009, the Government announced major structural reforms to the Home Warranty Insurance Scheme in NSW that will safeguard building industry jobs and better protect homeonwers. The change, which will take effect in NSW on 1 July 2010, involves the Government underwriting and capitalising the Home Warranty Insurance Scheme, which will be fully funded by premiums. For more information, refer to the New home warranty insurance arrangements web page.

Home warranty insurance needs to be provided by:

• a builder or tradesperson before taking any money (including a deposit) from a home owner (including an owner-builder) under a residential building contract and before starting any work under that contract
• a ‘spec’ builder before starting any residential building work on a property owned by the builder
• a developer before entering into a contract for the sale of a property on which a builder is doing or has done residential building work for the developer
• an owner-builder (ie. a home owner who did owner-builder work under an owner-builder permit) before entering into a contract for sale of the property on which residential building was done within the previous 6 years.

Home warranty insurance is required to be obtained where the contract price is over $12,000 or, if the contract price is not known, the reasonable market cost of the labour and materials involved is over $12,000.

Where the contract price or the reasonable market cost of the labour and materials involved does not exceed $12,000, there is no legal requirement for home warranty insurance to be obtained.

Contractors who carry out residential building work must still hold an appropriate licence with Fair Trading where the labour and materials involved are valued at over $1,000. 

Persons who contract and/or carry out specialist work (ie. electrical wiring, plumbing, gas-fitting, air-conditioning and refrigeration) require a licence regardless of the value of the work.

Top of page

Home warranty insurance must be obtained by the home building contractor. To apply to take out insurance, contractors will need to get an application form from an approved insurer.

You can minimise delays with your application by:

• submitting a complete application
• including up-to-date financial records
• checking with your insurance broker for specific information required
• making sure that all the required information is attached to the form.

You are generally required to provide the following information:

• recent balance sheet, profit & loss statement or tax returns
• statement of personal assets and liabilities
• copies of rates notices for all properties declared on the statement of personal assets and liabilities
• copy of current contractor licence
• if you were previously approved through another insurer, declaration of jobs undertaken and currently insured for the past 12 months.

The name on your licence and the name on the application form must be the same. That is, if you are:

• a sole trader, all of the above must be only in your individual name
• a partnership, all of the above must be in the name of you and your partner/s
• a company, all of the above must be in the name of your company.

For contact details of insurers and their brokers and agents, refer to the Approved insurers and Past approved insurers pages. Should further assistance be required, contact the Fair Trading on 13 32 20.

Approved insurers
Past approved insurers

Top of page

Minimum cover

From 1 March 2007, home warranty insurance policies must provide cover of at least $300,000. Between 1 May 1997 and 28 February 2007, the minimum cover that had to be provided was $200,000.

Future increases in the minimum cover provided under the scheme will be in line with any corresponding increase in the Producer Price Index [Materials used in House Building (Sydney)] that might have occurred since the previous increase. The next review of the minimum cover will occur in mid 2010.

The cover may be subject to limitations relating to over payment of deposits and progress payments and other limitations specified in the policy.

Claims for incomplete work are limited to 20% of the contract price (up to a maximum of $200,000 for policies issued between 1 May 1997 and 28 February 2007 and from 1 March 2007 onwards up to a maximum of $300,000).

Periods and types of cover

All policies

Cover is provided for loss (eg. financial loss or damage), arising from non-completion of work for a period of 12 months after the failure to commence, or cessation of, the work.

Policies issued before 1 July 2002

For policies issued before 1 July 2002, cover is also provided for a period of seven years from the date of completion of the work or the end of the contract for the work (whichever is the later), for loss arising from defective work.

Policies issued from 1 July 2002

For policies issued from 1 July 2002 onwards, cover for all losses (including loss arising from non-completion) is provided in the event of the death, disappearance or insolvency of a builder, tradesperson, developer or owner-builder. Cover for loss arising from defective work is provided for a period of:

• six years from the date of completion of the work or the end of the contract for the work (whichever is the later), for loss arising from a structural defect, and
• two years for loss arising otherwise than from a structural defect.

Policies issued from 19 May 2009

For policies issued from 19 May 2009 onwards, cover is also provided in the event of the suspension of the contractor licence of a builder or tradesperson responsible for work on the home owner’s property for failure to comply with a money (compensation) order in favour of the home owner made by a Court or the Consumer, Trader and Tenancy Tribunal. The period of cover provided in this event is the same as for policies issued from 1 July 2002.

Top of page

The disappearance of a builder is one of the grounds for lodging a claim under the present version of the home warranty insurance scheme.

The Office of Fair Trading and home warranty insurers have agreed on guidelines to be followed where a beneficiary of a home warranty insurance policy cannot locate the builder.

A homeowner who has a concern regarding defective or incomplete building work and who is unable to locate their builder should, in the first instance, lodge a complaint with Fair Trading. In the event that Fair Trading cannot find the builder, a letter will be provided to the homeowner stating that the builder is unable to be located, which can be submitted with any claim to an insurer under a home warranty insurance policy.

The provision of the letter will not in any way oblige an insurer to approve a claim or preclude an insurer from making its own enquiries to try to locate the builder. The period in which an insurer is required to determine a claim (ie 45 or 90 days, depending on when the policy was issued) will commence when the insurer receives the claim information.

The letter will, however, be accepted by the insurers as evidence of the homeowner's belief that the contractor has disappeared and of the homeowner having made all efforts to locate the builder. The homeowner will not be required by an insurer to undertake a further search for the builder.

Fair Trading will be responsible for issuing the letter to the homeowner on completion of its assessment of the complaint.

Top of page

Market practice guidelines to govern the operation of home warranty insurers were introduced on 1 September 2004. Compliance with the guidelines is a condition of the approval for insurers to provide home warranty insurance in New South Wales.

The guidelines are designed to bring more transparency and accountability to the provision of home warranty insurance. Core features of the guidelines include making the following information publicly available:

• insurers’ general underwriting guidelines and examples of premiums to be charged
• the standard forms builders must complete and information builders must provide, to help the insurer consider applications for insurance
• the details of each insurer’s service standards and the service standards of intermediaries
• the contact details of each insurer and their complaints handling process so that builders know how their concerns will be handled.

View or download the Market practice guidelines in PDF format (size: 77kb).

A person may lodge a complaint about a home warranty insurer where the insurer does not comply with the provisions of the guidelines.

Go to the Complaints against insurers page for more information.

Top of page