Home Warranty Insurance: What Australian Homeowners Must Know

Your builder hands you a quote for a $180,000 renovation. Buried on page three is a line item for home warranty insurance. What is it? Why are you paying for it? And what actually happens if your builder goes bankrupt halfway through the job?

Home warranty insurance is one of the most misunderstood protections in Australian building. Every state and territory runs its own scheme, each with a different name, different threshold, different coverage limit, and different claims process. With over 178,000 active licensed tradespeople on TradieVerify and 94,127 licensed builders alone, understanding how this insurance works is worth your time before you sign any building contract.

This guide explains the scheme from the homeowner’s perspective: what it covers, what it does not, when you can claim, and what to check before work starts.

What Is Home Warranty Insurance?

Home warranty insurance protects you if your builder cannot complete or fix their work because they have died, disappeared, or become insolvent. The builder takes out the policy before work begins, but the cost is passed through to you as part of the contract price. Premiums typically run between 0.5% and 1% of the contract value.

This is last-resort insurance. It does not cover disputes with a builder who is still trading and capable of fixing defects. If your builder is still in business, your remedy is through direct negotiation, your state’s fair trading body, or a tribunal such as NCAT (NSW), VCAT (VIC), or QCAT (QLD). The policy only activates when the builder genuinely cannot fulfil their obligations.

Every state except Tasmania currently requires builders to obtain this cover for residential work above a set dollar threshold. Queensland stands apart because its scheme covers broader situations, including where a builder simply fails to rectify defects ordered by QBCC, regardless of insolvency.

The policy transfers if you sell the property during the coverage period. Buyers of recently built homes should ask the seller for the insurance certificate at settlement.

Each State Calls It Something Different

One reason homeowners find this insurance confusing is that each state uses a different name for the same basic product:

Despite the different labels, the core purpose is identical: protect the homeowner when the builder can no longer stand behind their work.

State-by-State Comparison

The table below summarises each state’s scheme. Thresholds, coverage limits, and administrators vary significantly.

Key takeaway. Queensland has the lowest threshold at $3,300, meaning even a modest bathroom refresh triggers the requirement. NSW and WA sit at $20,000. SA recently aligned with this $20,000 figure as part of major 2025 reforms.

What Home Warranty Insurance Covers

When the builder has died, disappeared, or become insolvent, you can claim for:

Non-completion. The cost of hiring another builder to finish the work. This is the most common claim type when a builder goes bankrupt mid-project.

Defective work. Rectification costs for building defects discovered during the coverage period. This splits into structural defects (foundations, load-bearing walls, roof structure) and non-structural defects (cosmetic finishes, fixtures, tiling).

Lost deposits. Recovery of deposits paid to the builder who then failed to commence work. WA explicitly provides a separate $40,000 limit for deposit claims.

Subsequent owners. If you buy a property built within the coverage period, the insurance transfers to you automatically. You do not need to take out a new policy.

What Is NOT Covered

This is where many homeowners get caught out:

Builder still trading. If your builder is still in business but refusing to fix defects, you cannot claim on warranty insurance. Your options are fair trading complaints, tribunal applications, or court action. Check the consequences of hiring unlicensed tradies to understand why licensing matters.

Work below the threshold. A $15,000 renovation in NSW (below the $20,000 threshold) will not have warranty insurance. The builder is not required to obtain it.

Buildings over three storeys. Most state schemes exclude multi-storey residential buildings (generally above three storeys of accommodation). Apartment buyers in high-rise developments are typically not covered.

Appliances and fittings. Kitchen appliances, hot water systems, and other manufactured products are covered by manufacturer warranties, not this policy.

Normal wear and tear. Paint fading, carpet wear, and timber movement from seasonal changes are not defects.

Owner-builder work. If you hold an owner builder permit, this cover does not apply to work you do yourself. However, you must provide it to the buyer if you sell within the disclosure period.

Structural vs Non-Structural Defects Explained

Understanding this distinction matters because coverage periods differ. Most states cover structural defects for six years but non-structural defects for only two years.

Structural defects affect the building’s load-bearing capacity or weatherproofing: cracking foundations, movement in load-bearing walls, sagging roof trusses, failing retaining walls, and major water ingress through the building envelope. These are covered under statutory warranty provisions in every state.

Non-structural defects are everything else: cracked tiles, peeling paint, gaps in skirting boards, doors that stick, and minor plumbing leaks at fixtures.

The grey area. A leaking shower can be either. If the waterproofing membrane has failed (allowing water into the structure), that is structural. If a tap fitting is dripping, that is non-structural. Get an independent building inspector’s assessment because the classification affects your claim deadline.

How to Claim on Home Warranty Insurance

If your builder has died, disappeared, or gone insolvent, follow these steps:

Step 1. Confirm the trigger event. You need evidence that the builder cannot fulfil their obligations. An ASIC company search ($9) confirms insolvency or deregistration. A licence search on TradieVerify or the state regulator’s website shows if the licence has been cancelled or suspended.

Step 2. Locate your insurance certificate. The builder should have provided this before work began. Check your building contract documents. If you cannot find it, contact the state administrator (see the comparison table above) with the builder’s licence number and your address.

Step 3. Document the defects. Photograph everything. Get a building inspector to prepare a defect report. Keep all correspondence with the builder.

Step 4. Lodge your claim. Contact the administrator for your state with the certificate number, builder details, building contract, evidence of the trigger event, and the defect report.

Step 5. Assessment. The insurer arranges an independent inspection and assesses whether the claim falls within policy coverage.

Step 6. Payout. If approved, the insurer pays the assessed cost of rectification or completion, up to the policy maximum. You can then engage another licensed builder to finish the work. Search for licensed builders in your area on TradieVerify.

Important Claim Deadlines

Do not delay. Most states impose strict notification deadlines:

• VIC: 180 days after becoming aware of the defect
• NSW: 6 months after becoming aware
• QLD: 3 months for claims relating to major defects
• WA, SA, ACT, NT: Contact the administrator as soon as you discover the issue

Queensland: The Broader Scheme

Queensland’s warranty scheme works differently from every other state. Administered by QBCC, the Queensland scheme provides coverage in situations where the builder has not gone insolvent or disappeared. If the builder fails to comply with a QBCC direction to rectify defective work, homeowners can claim regardless of the builder’s financial status.

This makes QLD’s scheme a genuine consumer protection tool rather than a strict last-resort policy. The QBCC also covers fire, storm, and tempest damage to incomplete work during construction.

With 35,393 active licensed builders in Queensland on TradieVerify, the QBCC scheme covers the largest state builder population after Victoria.

The trade-off is a lower maximum payout. Standard QLD coverage caps at $200,000 per claim category (optional additional cover up to $300,000). Compare this with NSW’s $340,000 or VIC’s $300,000.

What to Check Before You Sign a Building Contract

Claims are painful and time-consuming. Prevention is better. Before signing any building contract, verify these five things:

1. Confirm the builder’s licence is current. Search on TradieVerify or the relevant state register. Check the licence class covers your project scope. Read our builder licensing guide for licence class details.

2. Ask for the insurance certificate. The builder must obtain this before collecting any deposit or starting work. The certificate should list your name, the property address, the contract value, and the policy number. If the builder cannot produce it, do not proceed.

3. Check your contract value against the threshold. Is your project above your state’s threshold? If you are in NSW or WA and the contract is $18,000, the builder is not legally required to provide cover. Consider whether you want to proceed without protection, or whether the scope (and contract value) will increase once variations are added.

4. Verify financial standing. In Queensland, check the builder’s QBCC licence status, which shows their financial category. In Victoria, the builder must hold a Letter of Eligibility (LOE) to purchase DBI. Ask to see it.

5. Check the builder’s track record. While individual claim data is not public, you can check whether the builder has had their licence suspended, cancelled, or conditions imposed. A builder with multiple QBCC directions or VCAT orders is a higher risk.

Premium Costs: What You Are Actually Paying

The builder pays the premium upfront, but this cost is passed to you within the contract price. Typical premiums:

Premiums vary based on the builder’s claims history and financial standing. Builders with strong track records pay lower premiums. In NSW, icare announced premium adjustments in 2025 to ensure long-term sustainability of the Home Building Compensation Fund.

Some builders try to keep the contract value below the threshold to avoid the requirement. Be cautious of quotes that suspiciously land just under $20,000 in NSW or WA. If the realistic scope exceeds the threshold, the contract value should reflect this.

Recent Changes to State Schemes (2025)

Several states have reformed their schemes in 2025:

Victoria. Domestic Building Insurance administration transferred from VMIA to the Building and Plumbing Commission (BPC) on 1 July 2025. All existing VMIA policies are now managed by BPC. Tighter financial checks target ‘phoenix’ companies that collapse and re-register under new names.

South Australia. Two major changes took effect: maximum payout increased from $150,000 to $250,000 (October 2025), and the threshold rose from $12,000 to $20,000 (November 2025).

Queensland. QBCC broadened the definition of “major defect” to include certain water ingress and fire safety failures, extending the six-year structural coverage to more types of building problems.

Tasmania. Legislation passed in 2023 to reintroduce the scheme after it was abolished in 2008. The new scheme is expected to commence with a $20,000 threshold and a last-resort model consistent with other states. Until it is active, Tasmanian homeowners building a new home have no warranty protection.

When You Are Not Covered: Alternative Remedies

If your situation falls outside the warranty scheme (builder still trading, work below threshold, or no policy in place), you still have options:

State fair trading complaints. Every state regulator can investigate complaints about licensed builders. In Queensland, QBCC can issue directions requiring the builder to rectify defects. In NSW, Fair Trading can mediate disputes.

Tribunal applications. NCAT (NSW), VCAT (VIC), QCAT (QLD), SAT (WA), SACAT (SA), ACAT (ACT) handle building dispute resolution with lower costs than court.

Australian Consumer Law. Under sections 60 to 62, building services must be provided with due care and skill, be fit for purpose, and completed within a reasonable time. These guarantees apply regardless of any insurance policy. Read more about your rights when hiring tradespeople.

Direct legal action. For claims above tribunal limits, you may need to pursue the builder through the courts. Get advice on the merits before proceeding.

Home Warranty Insurance vs Home and Contents Insurance

These are completely different products that homeowners sometimes confuse:

Warranty insurance covers defective or incomplete building work when the builder can no longer fix it. It is taken out by the builder and relates to the construction process.

Home and contents insurance covers damage to your existing home from events like fire, storm, theft, and flood. It is taken out by the homeowner and relates to ongoing property risks.

A leaking roof caused by a storm is a home insurance claim. A leaking roof caused by poor construction is a warranty claim (if the builder is insolvent) or a fair trading complaint (if the builder is still trading).

Frequently Asked Questions

Does home warranty insurance cover renovations?

Yes, if the renovation contract value exceeds your state’s threshold. In Queensland, any residential building work above $3,300 requires cover. In NSW and WA, the threshold is $20,000. Kitchen and bathroom renovations commonly exceed these thresholds. Verify your builder holds the correct licence class for renovation work.

Who pays for the warranty insurance?

The builder takes out and pays for the policy, but the cost is passed through to you in the contract price. Premiums range from 0.5% to 1% of the contract value. You should see this as a line item or included in the builder’s margin. Ask for the certificate before paying any deposit.

Can I claim if my builder refuses to fix defects but is still in business?

No. In every state except Queensland, the warranty scheme is last-resort only. Your options are to lodge a complaint with your state’s fair trading body, apply to the relevant tribunal (NCAT, VCAT, QCAT), or take legal action. In Queensland, you can claim if the builder fails to comply with a QBCC direction to rectify.

I am buying a home built three years ago. Am I covered?

Potentially. The warranty policy transfers to subsequent owners automatically. If the original builder obtained cover, you are protected for structural defects for the remaining coverage period (up to six years from completion in most states). Ask the seller or their solicitor for the insurance certificate at settlement.

Does the warranty scheme apply to owner-builder work?

Not to work you do yourself. However, if you are an owner builder and sell within the disclosure period (5 to 7.5 years depending on state), you may be required to provide warranty cover to the buyer.

What happens in Tasmania where there is no scheme?

Tasmanian homeowners currently have no warranty protection. Legislation has been passed to reintroduce the scheme, but it is not yet active. Until it commences, Tasmanian homeowners should take extra care to verify their builder’s licence, financial stability, and insurance coverage before signing a contract.

Key Takeaways

• Home warranty insurance is last-resort protection that covers you if your builder dies, disappears, or goes insolvent. Queensland’s scheme is broader.
• The builder obtains the policy, but you pay for it through the contract price (0.5% to 1%).
• Thresholds vary from $3,300 (QLD) to $20,000 (NSW, WA, SA), so check whether your project qualifies.
• Coverage periods are typically six years for structural defects and two years for non-structural defects.
• Always ask for the insurance certificate before paying any deposit or allowing work to begin.
• Verify your builder’s licence on TradieVerify and confirm their licence class covers your project scope.
• If your builder is still trading but won’t fix defects, use your state tribunal or fair trading body instead.

Related Guides

• How to Hire a Licensed Builder — Our builder hiring guide
• What Happens If You Hire an Unlicensed Tradie? Penalties, Insurance Risks, and Your Rights — Our unlicensed tradie risks
• How to Handle a Building Dispute — Our building dispute guide

Sources

1. icare, “Home Building Compensation Fund,” icare.nsw.gov.au
2. Building and Plumbing Commission VIC, “Domestic Building Insurance,” bpc.vic.gov.au
3. QBCC, “Home Warranty Insurance: A Guide for Homeowners,” qbcc.qld.gov.au
4. SAFA, “Building Indemnity Insurance,” safa.sa.gov.au
5. Master Builders ACT, “Fidelity Fund,” mba.org.au
6. Fidelity Fund NT, “Homeowner Protection,” fidelityfundnt.com.au
7. CHOICE, “Home and Builders Warranty Insurance,” choice.com.au
8. HIA, “Home Indemnity Insurance in Western Australia,” hia.com.au