What is Home Warranty Insurance?

Home Warranty Insurance is designed to cover a homeowner against the death, disappearance insolvency of a contractor for building/renovation works carried out on their residential property. If the contractor’s death, disappearance or insolvency happens before the works are completed, the insurance goes towards the extra cost of engaging another contractor to complete it. If there is a fault in the completed work that needs to be rectified during the warranty period, the insurance covers the cost of rectification by another contractor if the original contractor is no longer able.

Please note that this page seeks to provide only a very general explanation of Home Warrant Insurance. Home Warranty Insurance is governed by legislation and regulation and you should refer any specific questions to our office.

It is required for any residential work carried out in New South Wales, with a value of $12,000 or more. It applies to contracts between trade contractors and home owners, including owner-builders. It does not apply to contractors between licensed builders and sub-contractors, nor between one sub-contractor and another.

It is the obligation of the contractor to obtain the insurance on behalf of the consumer (your client). Home Warranty Insurance does NOT cover you as the contractor. It is a mandatory provision of cover for the consumer as required by the Home Building Act 1989, and you, the contractor is obliged by law to arrange cover for your domestic clients.

Home Warranty Insurance is sometimes referred to as Builders Warranty Insurance. The Painters and Plumbers facilities offered by MGA are available only to those who hold NSW contractor licences in these trade occupations

You may have heard that Home Warranty Insurance is not required for multi-story buildings. This is NOT the case. For any repairs and maintenance (including painting or plumbing work) over the $12,000 threshold on domestic multi-story buildings, the law requires that Home Warranty Insurance be in place prior to the commencement of the work.

Home Warranty Insurance is not required:

• for commercial/industrial contracts
• if you are contracted to a principal builder who will provide Home Warranty Insurance for the entire job (unless the principal is an owner-builder)
• for contracts under $12,000

How long does it last for?

The period of cover for loss arising from a structural defect is 6 years after the completion of the work, or, in the case of loss arising otherwise than from any such structural defect, 2 years from the completion of the work. Please refer to your job certificate or contact our office should you have any questions

How can I apply for it?

All applicants are required to undergo a once-a-year-only process to be granted eligibility for Home Warranty Insurance before applying for a job-specific Warranty Insurance policy. You will need to provide a current contractors licence number(s) and some other information in order to be granted eligibility.

MGA Insurance Brokers has made the eligibility process simple, by arranging that in most cases you will not be required to submit any financial statements. Additionally, there is no need to provide Bank Guarantees or Deeds of Indemnity.

ELIGILITY REQUIREMENTS - IMPORTANT

1) Registered Business Name
2) ABN
3) Contractors Licence issued by the Department of Fair Trading
4) Copy of your Certificate of Registration for the Trading Name

**NOTE** In order to obtain eligibility, points 1,2 and 3 must be identical in name (ie. the name that you contract to your consumers in):

If you are set up as a Pty Ltd company, or a partnership, you will be required to submit evidence of TWO Contractors Licences; one for the company/partnership, and one for the primary supervisor.

Sole Traders are required to submit one Contractors Licence only.

If your business is part of a Trust, copies of the Trust Deeds will need to be presented prior to the eligibility being confirmed.

Plumbers are required to be members of the Master Plumbers Association in order to be considered for eligibility. This is part of the on-line application criteria and we will confirm this membership on your behalf.

Please refer to our online application for pre-eligibility confirmation or contact our office on 1300 654 642 for more information.

Once eligibility has been confirmed (this may take up to three working days), we will be able to issue individual, job-by-job insurance certificates for each contract requiring cover.

Is there an annual limit to how much warrantable work I do?

No, once you have obtained your letter of eligibility for the year from the insurer there is no limit to the number or value of contracts that you enter into requiring cover during that year.

How much does it cost?

There is an initial fee charged to the contractor in order for eligibility to be confirmed for a 12-month period. Once the insurer has accepted eligibility, each new contract that requires Home Warranty Insurance will incur a premium, which is rated according to the contract value. Please refer to the Painters and Plumbers on the Homepage to access premiums.

As the insurance certificate for the job will be covering the property owner directly, and benefits the owner rather than the contractor, contractors should pass the premium charge onto their clients, by including the cost in the total contract price.

Please note that a separate Home Warranty Insurance policy is required for each domestic residence that has a contract value exceeding $12,000.

For example, if there is a contract totalling $150,000 for a strata block of ten units, ten individual policies would need to be taken out as the total contract value per unit is $15,000 (ie. greater than $12,000). Ten individual premiums would be charged, with a separate policy issued to each unit owner.

If the total contract value is more than $12,000, but when divided by the number of individual residences is less than $12,000, the whole contract would be covered under one insurance policy, and one premium would be charged.

Please note that this situation is only a general explanation and that the commentary is not meant to be specific advice on Home Warranty Insurance

Can I apply for retrospective insurance?

The Home Building Act (1989) stipulates that a Home Warranty Insurance certificate must be put in place by the contractor BEFORE commencing any work, and before collecting any money on the contract.

If you are in a position where a job requiring Home Warranty Insurance has already been completed or partly completed please contact our office.

What happens if a contractor does not have proper cover in place?

As Home Warranty Insurance is a legal requirement, if it is not in place the property owner can cancel the contract at any time. In such cases, the consumer is not obliged to pay anything for any works carried out.

Non-compliance with the provision of Home Warranty Insurance is a breach of the requirements of a contractor’s licence can result in heavy fines for the contractor.