When Can I Claim Under a Policy of Insurance Under the Home Building Compensation Fund?

Insurance under the Home Building Compensation Fund is required to be obtained by a builder entering into a residential building contract of greater than $20,000 with a home owner prior to commencing any work under that contract.

Insurance policies under the Home Building Compensation Fund provide a set period of cover for loss caused by defective or incomplete works.

Cover for loss arising from defective work is provided for:

  1. Six (6) years from the date of completion of the works for loss arising from a major defect in residential building work, and
  2. Two (2) years for any other loss.

However home owner can only claim on a policy of insurance under the Home Building Compensation Fund in the event of the death or insolvency of the builder or where the home owner can establish that the builder has disappeared.  There are a number of grounds that a home owner must establish to prove the disappearance of a builder.

If the builder is still trading and able to be located, a home owner cannot claim under the policy of insurance.  It must bring a claim directly against the builder.

To make a claim under the policy of insurance under the Home Building Compensation Fund a home owner must notify the insurer. Once a claim is lodged, and accepted, the insurer not only takes the place of the builder in the claim, they can also rely upon the insurance policy taken out between the builder and the insurer.

Most insurance policies will have strict notification provisions regarding defects, these generally include notifying the insurer within 12 months for incomplete works, two (2) years for minor defects and six (6) years for major defects.  It is vital that you check and comply with the policy for a claim to be successfully made.

We suggest you seek legal advice before lodging any insurance claim under the Home Building Compensation Fund to ensure that all evidence and relevant details are provided to the insurer to maximise any payout of your claim.

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By Amanda Crosbie,
Director, Senior Solicitor