Builders insurance is not one policy. It is a set of covers that each answer a different question: what happens if the work burns down before handover, if a passer-by is injured, if the tools are stolen, or if a design you were responsible for turns out to be wrong. Our construction insurance page sets out the range. This guide explains what residential and commercial builders typically carry, how the pieces fit together, and the one cover that sits outside the normal business insurance market altogether.
Contract Works
Contract works insurance responds to physical loss or damage to the works under construction, including materials on site, from events such as fire, storm, theft and malicious damage, subject to the policy terms. Our explainer on how contract works insurance works goes through the mechanics. The points builders get wrong are usually these:
- Annual versus project. An annual policy insures projects started during the year within its limits, including a maximum contract value per project. A job above that limit needs to be declared or insured on its own.
- Existing structures. Renovations and extensions put the existing house at risk as well as the new work. Contract works policies may extend to existing structures, but typically only when that extension is included and a value is declared. The owner’s home insurer should also be told, because home policies may restrict cover while a building is under renovation.
- Who arranges it. On residential jobs the builder usually arranges contract works. On larger commercial projects the principal may arrange a project policy instead, and the head contract decides who insures the works. Read that clause before pricing a job. Our contract works insurance page explains the options.
- Materials off site and in transit may need a specific extension.
Public Liability for Builders
Public liability responds to your legal liability for injury to others and damage to their property arising from your work. For builders, three points deserve attention.
- The limit. Principals, developers and councils commonly ask for a specific limit before work starts. Check the contract, not last year’s certificate.
- Vibration, removal of support and subsidence. Excavation, underpinning and demolition near neighbouring buildings can cause cracking and movement. Some policies exclude this, others limit it or apply a higher excess. Confirm the wording before digging next to a boundary.
- Defective work. Public liability typically responds to damage caused by your work, not to the cost of fixing the work itself.
Subcontractors should carry their own liability cover, and your contracts with them should say so. Our article on subcontractor insurance requirements sets out what to check and how to keep certificates current.
Tools, Plant and Vehicles
- Tools. Theft from sites and vans is a steady source of claims for builders. Tools policies commonly carry conditions about forcible entry and overnight storage. See tools of trade insurance.
- Owned plant. Excavators, skid steers, scaffolding and site sheds should be scheduled with current replacement values.
- Hired-in plant. Hire agreements commonly make the builder responsible for machines on hire. Either take the hire company’s waiver or check that your policy includes hired-in plant.
- Vehicles. Utes, vans and trucks need business use declared, and every driver within the insurer’s criteria.
Professional Indemnity for Design and Construct
A builder who builds to someone else’s drawings has limited design exposure. A builder who takes on design and construct, prepares or adapts drawings, specifies materials or engages designers under their own contract has taken on design responsibility. Public liability typically excludes liability arising from professional advice and design. That gap is what professional indemnity is for. Our comparison of public liability vs professional indemnity explains the difference, and the claims-made basis that PI policies usually use.
Principals on design and construct contracts commonly ask for evidence of PI at a specified limit, sometimes with a requirement to keep it in place for a period after completion. Because PI generally responds to claims made while the policy is in force, that requirement means renewing it for years after the job, so factor the cost into the price.
Home Warranty: Separate and State-Regulated
Residential builders in some states must arrange a separate form of cover for homeowners before starting certain domestic work. It goes by different names, such as home warranty insurance or domestic building insurance, and in some states it is provided through a government scheme rather than the private market.
It protects the homeowner, not the builder, and it is not part of your business insurance programme. Whether it applies, the eligibility criteria and the application process all vary by state and change from time to time. Check the current requirements with the relevant state authority before quoting domestic work. A business insurance policy does not replace it.
Workers and Personal Cover
Workers compensation for employees is arranged under state and territory schemes, and the rules on who counts as a worker, including when a subcontractor may be treated as one, vary by state. Check your current obligations with the relevant authority.
Sole traders and working partners generally sit outside workers compensation for themselves. If an injury would stop you working and stop the income, personal accident and sickness cover is worth pricing alongside the business policies.
Getting Builders Insurance Right at Renewal
- Declare turnover and the largest contract value you expect to take on.
- List projects that involve existing structures, demolition, excavation near boundaries or design responsibility.
- Update plant and tool values.
- Collect current certificates from subcontractors.
- Check contracts signed during the year for insurance clauses you have not yet met.
- Note any shift in the mix of residential and commercial work.
Do not wait for renewal if the business changes shape mid-year. Moving from single dwellings into commercial fit-outs, taking on a first multi-storey job, or signing a first design and construct contract all alter the risk the insurer agreed to. A programme set up for one kind of building work may not fit another, so tell your broker when the change happens rather than at the next renewal.
Common Questions
Does my public liability pay to fix defective work?
Typically not. Public liability responds to injury, and to damage your work causes to other property. Rectifying the work itself is usually excluded.
Do I need contract works on a small renovation?
It is worth checking. Renovations put both the new work and the existing building at risk, and the homeowner’s policy may not respond while the house is under construction.
Is home warranty the same as contract works?
No. Home warranty protects the homeowner in defined circumstances set by each state’s scheme. Contract works insures the physical works during construction.
Talk It Through
Request a quote or call 1300 983 940 and we will review your programme against the contracts and projects you are taking on. Our construction insurance page shows the wider range of covers for building businesses.
General advice only. This article does not take your objectives, financial situation or needs into account. Consider the relevant PDS and Target Market Determination before deciding on a policy.