Owner-builder insurance: what cover should you check?

Becoming an owner-builder means taking on responsibilities that would normally sit with a builder.

Insurance is one of them.

There isn't one national policy called “owner-builder insurance” that automatically covers everything.

Instead, you may need to look at several different risks.

Contract works insurance

Contract works insurance is designed to protect construction work while the project is underway.

Depending on the policy, this can include:

• the new work
• materials
• partially completed construction
• certain insured events such as fire, storm, theft or accidental damage
• existing structures where specifically included

For an owner-builder, this can be one of the main policies to check before work starts.

Public liability insurance

As the person responsible for the project, you also need to think about what happens if somebody is injured or other property is damaged.

Public liability insurance can cover certain legal liability claims arising from the building work.

For example, there could be risks involving:

• visitors
• neighbours
• tradespeople
• neighbouring buildings
• other third-party property

Check the policy limit and the work it covers.

What about the existing house?

This is particularly important for renovations and extensions.

Contract works cover for the new project doesn't automatically mean the existing house is insured.

Likewise, your existing home insurer may place restrictions on cover once significant building work begins.

Before starting:

• tell your home insurer about the work
• check whether the existing building remains covered
• check whether the contract works policy includes existing structures
• make sure there isn't a gap between the two

What insurance should your trades have?

Owner-builder doesn't mean you necessarily do every job yourself.

You may use builders, electricians, plumbers, carpenters and other contractors.

Check that contractors are appropriately licensed where required and hold the insurance relevant to their work.

Ask for evidence when appropriate rather than simply assuming it's in place.

What about workers compensation?

This can become complicated for owner-builders.

Depending on how people are engaged, you may have workers compensation obligations.

A person called a “contractor” isn't automatically treated as a contractor for every legal or insurance purpose.

Check the rules that apply in your state or territory if you're paying people to work on the project.

What about home warranty or home building compensation?

This is where national articles often get into trouble.

Australia doesn't have one owner-builder warranty rule.

Different states and territories have different:

• scheme names
• thresholds
• permit requirements
• sale requirements
• contractor requirements
• insurance arrangements

For example, requirements in NSW aren't necessarily the same as Victoria, Queensland or Western Australia.

Check the current government guidance for the state or territory where you're building.

Does normal home insurance cover an owner-build?

Don't assume it does.

Home policies can restrict or exclude cover when major construction or renovation work is taking place.

Tell your home insurer before the work starts.

This is particularly important if:

• structural work is involved
• part of the roof is being removed
• the home becomes unoccupied
• the project value is high
• walls or major sections of the existing building are being altered

What should you have ready when getting a quote?

You may be asked for:

• project address
• project value
• type of construction
• plans and approvals
• owner-builder permit details where relevant
• construction timeframe
• existing structure value
• subcontractor details
• excavation or demolition
• claims history
• public liability limit

More unusual projects can require more information.

Arrange insurance before work starts

Don't leave contract works insurance until half the building is already standing.

Some insurers can be more reluctant to take on a project after construction has started.

Work out who is responsible for each policy before the first major work begins.