What Is Home Warranty Insurance?
Home warranty insurance (sometimes called building indemnity insurance or domestic building insurance) is a mandatory insurance policy that licensed builders must take out before starting residential building work over a certain value. It protects the homeowner if the builder cannot complete the work or return to fix defects because they have died, disappeared, or become insolvent.
How It Works
The builder — not the homeowner — is responsible for purchasing the policy before work begins. The policy covers the homeowner for a set period (typically six to seven years for structural defects and two years for non-structural defects) after practical completion. If the builder cannot fulfil their obligations, the homeowner can make a claim to have the work completed or defects rectified by another builder.
Coverage thresholds and maximum claim amounts vary by state. In most jurisdictions, work valued above $12,000–$20,000 requires a policy. The insurer assesses the builder’s financial standing before issuing coverage, which acts as an additional layer of consumer protection.
State Variations
| State/Territory | Scheme Name | Threshold | Maximum Cover |
|---|---|---|---|
| QLD | QBCC Home Warranty Scheme | $3,300+ | Statutory fund (no cap) |
| NSW | Home Building Compensation Fund (icare) | $20,000+ | $340,000 |
| VIC | Domestic Building Insurance | $16,000+ | $300,000 |
| WA | Home Indemnity Insurance | $20,000+ | $200,000 |
| SA | Building Indemnity Insurance | $12,000+ | $150,000 |
| TAS | Building Practitioner Accreditation (no mandatory HWI) | N/A | N/A |
| ACT | Fidelity Fund Certificate | $12,000+ | $85,000 |
| NT | Home Building Certification Fund | $12,000+ | $200,000 |
How It Relates to Licence Verification
Home warranty insurance is directly tied to the builder’s licence status. Only licensed builders in good financial standing can obtain a policy. If a builder cannot provide proof of home warranty insurance before work begins, it is a red flag that their licence may be suspended, cancelled, or non-existent. TradieVerify helps you verify a builder’s licence status, which is your first step in confirming they can obtain the required insurance cover.