DOES A BUILDER HAVE INSURANCE WHILE BUILDING MY NEW HOME?
We sometimes get this question as to whether we have insurance, and although we already have a blog in our library called Let’s Talk About Home Insurance, we thought we should try and make this particular point a bit clearer for everyone’s benefit. Does a builder have insurance while building my new home? Yes, absolutely they do!
They have to by law anyway. So if they don’t, then they’re breaking the law, simple as that.
Let’s explain it in a bit more detail. But before we do, we want to say that this blog isn’t about warranty insurance, sometimes called Homeowners warranty insurance. See our blog mentioned above for more detail on this. What this blog is about is construction insurance. Insurance that specifically covers the construction of your new home – the period of time when the tradies are out there, working away on the hammer and nails making your dream become a reality.
But what if the dream goes sideways when the tradies arrive to brick up the walls and all of the bricks have been stolen overnight? That will never happen, you say? Don’t you believe it. There’s not much that can’t – and doesn’t – happen in the real world. 2020 should tell you that!
So $10,000 worth of bricks are gone, and the bricklayers turn around and go to another job. What to do now, you say?
That’s where the builder pulls out their insurance policy and claims the theft on insurance. Sure, they have to pay an excess on the claim – a few hundred dollars probably – but that’s cheaper than the $10k + lost time!
The builder notifies the police, orders the new bricks, arranges a new date with the bricklayers, notifies you that there’s going to be a delay of a week, and then all is ok and life goes on as normal again.
Phew. And that’s what insurance is all about.
Of course, it doesn’t just cover theft. It covers lots of things.
Public liability for example. What would happen if a neighbour hurt themselves very badly walking past the site when a piece of iron got loose in the wind? A huge claim, maybe even millions? Yes, definitely. But once again, that’s where the insurance comes into play. And of course, flood, storm and fire. And then there’s even product liability.
The key here is that the builder is required to take out an insurance policy even before they can get a builders license. It’s not just that a builder ‘should’ have this insurance – there’s just simply no way around it, they have to have it to operate. And that’s peace of mind for you.
Of course, there are unfortunately some dodgy people out there who try to pose as real builders and do all the wrong things and then leave the homeowner with a mess on their hands. Do you homework on your builder early on so you know who you’re dealing with.
And when you get to signing the building contract with the builder, they have to include a certificate of currency of the insurance within the contract. Check to make sure it’s current – they only last a year, they’re renewed yearly. And if you’re getting funding, the bank will also make sure that this document is included and that it’s current.
And then when the construction comes to an end, so does the insurance cover for the builder on your new home. Technically the cover ends when the final monies are paid and the home is yours, but it can sometimes end sooner than that – when an occupancy permit is issued for example, or in an instance of a contract where the builder is only doing a portion of the work and the homeowner is completing it.
It’s important to be aware of when the builders insurance finishes, because you need to have your insurance premium in place beforehand.
In fact, we always recommend that the homeowner establish the new policy a couple of weeks before the completion. Then at least there’s some overlap between the 2 policies, and if something does go wrong, such as some vandalism at the last minute, then there doesn’t need to be an argument as to whether it’s covered or not – the 2 insurance companies can fight it out and get it covered.
As always, feel free to ask for more information!
Disclaimer. This blog is our opinion only. The information provided in our blogs is accurate and true to the best of our knowledge, but there may be omissions, errors or mistakes. The information presented in our blogs is for informational purposes only and we are not professionals, so the content we provide shouldn’t be taken as legal advice. We strongly recommend consulting with a professional before taking any sort of action. We reserve the right to change how we manage our blog and we may change the focus or content at any time.
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