What Insurances Does an Owner Builder Need?

Licencing

Planning and building your dream home or just undertaking a renovation or an extension is an exciting and rewarding experience. Being an owner builder gives you the control and often also means a substantial saving in building costs.

As an Owner Builder, you will be responsible for coordinating construction work, managing site safety, and supervising any subcontractors, workers, and visitors to the site. You could also be found responsible for any defective work for up to 6 years.

Most councils allow owner-builders to undertake their own work. However, permits are required, which specify responsibilities, including having the appropriate insurance in place.

State & territory governments have free information available to guide you through the application process, such as from Fairtrading NSW. This portal also includes information that can assist you, for example, managing contractors and having the right insurance in place.

Managing risks and insurance

Managing risks of injuries to people during construction or damage to the building works is essential and required under the work, health and safety laws. The Pocket Guide to Construction Safety (SafeWork NSW) provides a quick guide to key hazards, as well as Checklists to assist you in managing the work, as well as accident management, if one occurs.

Having the right mixture and amount of insurance cover is required as part of the owner-builder licence. Insurance is also crucial to protecting yourself from the financial risks of damage to the work or contractors being injured.

Key Insurances for Owner Builders

Owner Builder Home Warranty Insurance

Owner Builder warrantee insurance is mandatory in both Victoria and WA and needs to be supplied to the purchaser before selling. Otherwise, it’s voluntary for NSW, SA, QLD and ACT. The NT has a fidelity fund in place, which is similar to insurance and is also mandatory.

Residential Owner Builders Home Warranty Insurance protects the home purchaser and subsequent buyer from the costs to rectify major items due to defective workmanship. It can only be claimed on if the owner builder dies, disappears or becomes insolvent during the Home Warranty period, which is usually up to 6 years from the date the occupancy certificate was issued.

Note - Licenced building contractors doing the work (such as electricians or plumbers) are required to have their own Builders Warrantee insurance in place for work generally over $10,000 (it varies from state to state).

Contract Works Insurance

This has two parts (Part A) Legal Liability and (Part B) Material Loss or Damage

Contract Works Insurance is a package of covers that can be customised and designed specifically for the building work. Insurance starts from the commencement of work and continues until the end of the defects/ maintenance liability period.

Contracts Works Insurance has two main sections:

Part A - Material Damage covers theft, loss or damage to the works or materials to be incorporated. For example, wood stored on site for roofing or tiles that are damaged in a storm or stolen.

Part B – Public & Products Liability provides legal defence costs and covers court-awarded damages, if a contractor or other visitor to the site is injured. This policy also covers personal injury or property damage caused by the completed work (product liability).

Other covers that can be included for an additional premium include: off-site storage of materials, transit of materials to the site, your construction plant, tools & equipment on site, including hired-in items.

Personal Accident Insurance

As an owner-builder, you are likely to be hands-on and involved in some part of the work moving or lifting material or even walking around the site. It’s easy to trip or fall over tools or materials, causing injury. Personal accident insurance provides you with weekly benefits for loss of income if you can’t work for a period of time or will pay a lump sum if you're permanently injured.

Workers' Compensation Insurance

If you hire labourers to assist you in the construction project, you may be legally required to have workers' compensation insurance. Workers' compensation covers the cost of paying ongoing wages, medical and rehabilitation costs, as well as a lump sum if the worker is permanently injured.

Builders or tradies working on-site should have their own workers' compensation or personal accident insurance.

Taking the time to talk to your insurance adviser about the appropriate cover for your project is an easy way to safeguard yourself against potentially high financial costs to repair or replace the work, as well as legal defence costs and court-awarded damages if anyone is injured.

Contact your professional insurance adviser today to make sure you have the right type and mixture of insurance as an Owner Builder.

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