Unless your house is part of a multistorey development exceeding three storeys your builder is required by law to take out home indemnity insurance on your behalf.
Blogger: Darren Standish, Property Prosperity
This insurance policy ensures that your house can be finished in the event that your builder dies, disappears or has gone out of business because he/she can't pay his/her debts (i.e. insolvent).
The insurance policy is required to be in place during construction and until six years from the date of "practical completion," that is, when the house can be reasonably used for its intended purpose.
Typically the cost of taking out home indemnity insurance should be included in the building contract. The builder chooses an insurer from a list of approved insurers and takes out the policy on behalf of the homeowner.
The minimum level of insurance cover required by law provides for a maximum payout for loss of building deposit of $13 000 and the maximum payout that can be made to rectify or complete a house under the insurance cover is currently $100 000 or the value of the contract work (whichever is less).
Your builder should provide you with a certificate of home indemnity insurance before starting any building work or taking any money from you under the building contract.
It is a good idea to keep the certificate of home indemnity insurance so that you can give this to the new owner, should you sell the house before the six-year expiry date.
If you need to make a claim under the home indemnity insurance policy you may be required to pay an excess, this amount may vary with each insurer.
You should consider taking out home and contents insurance when you take possession of your house in case of damage (unrelated to construction), fire, or theft.
About Darren Standish
Darren Standish established Property Prosperity in 2004 initially as a property development company, however after repeated requests for assistance the business evolved into a development consulting business.
Property Prosperity was initially focused on assisting clients with subdivisions and negotiating with councils to ensure that clients maximized their return on investment. Over the years additional services were gradually added to ensure the development process was as seamless as possible for its clients. We expanded into offering individually tailored finance solutions and then added Property Development Analysis, Property Sales and a Builder Broker Services.
Darren is the overachiever of the team and has more qualifications than your average university graduate. As well as completing a Bachelor in Economics, Bachelor in Commerce and post graduate in Accounting he subsequently went on to complete a Diploma in Financial Service, Diploma in Real Estate and Certificate IV in Building. He is a qualified Certified Practicing Accountant (CPA), a licensed Real Estate Agent, licensed Mortgage Broker and holds a Builders License.