New-home buyers warned over building cover
3 Dec 2001
People building their own home should make sure their builder has compulsory home warranty insurance.
HIH Insurance was the major issuer of home warranty insurance and with the company’s collapse earlier in the year, only two home warranty insurers remain; Dexta Corporation and HIA Insurance Services. With home warranty insurance harder and more costly to obtain, it appears a number of builders are resorting to carrying out work illegally. Some builders are even asking their clients to register themselves are owner-builders, thereby taking on the risk themselves.
When consumers sign a contract with a builder for a new house or for renovations over $5000, the builder must have home warranty insurance. The insurance is to protect the home-owner against problems such as defective work, contractual problems, death, bankruptcy or disappearance of the builder. The type and amount of coverage varies between the states. For example in NSW consumers can lodge a claim for up to seven years after the home’s completion for problems up to $200,000 while in South Australia coverage is provided for up to $80,000 for five years and claims cannot be made for contractual issues.
Consumers need to be aware of the risks associated with either having illegal work done by a builder who has no insurance or by taking on the risk themselves as owner-builders. Under both circumstances if problems do occur the consumer could be left with the bill. It is also important to note that without home warranty insurance the home-owner is unable to sell the home for the time period for which the house would normally be covered by insurance (ie. for seven years in NSW).
Sydney Morning Herald, p4, 3/12/01.
by Karen Hawkins
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