PERTHHome indemnity insurance: your protection if the builder fails
Home indemnity insurance in WA: what it covers, the $20,000 threshold, when the builder must provide the certificate
There is one piece of paper that decides whether you are protected if your builder goes under mid-build, and a surprising number of owners never check that it exists. It is called home indemnity insurance, it is compulsory in Western Australia, and the time to confirm it is before you pay a deposit, not after the builder has disappeared.
What it is and what it covers
Home indemnity insurance, or HII, protects a homeowner and any subsequent owner against financial loss when a builder cannot complete the work, or cannot meet a valid claim for faulty or unsatisfactory building work, because of one of three "relevant circumstances": the builder has died, disappeared, or become insolvent. It covers loss of the deposit and the cost of completing or rectifying the work, and it covers structural defects for six years from the date of practical completion.
It is required under the Home Building Contracts Act 1991, and it applies to residential building work valued over $20,000 — the same threshold at which a registered builder is required. It does not apply to "associated work" such as a standalone pergola, fence or swimming pool.
When the builder must provide it
The obligation sits on the builder, and the timing is strict. The builder must take out HII in the name of the owner, and give the owner a copy of the certificate of insurance, before accepting any payment or commencing work. A copy of the certificate is also lodged with the building permit application, and the permit authority can refuse the application if evidence of HII is not provided.
So there are two natural checkpoints where you can confirm it exists: before you pay a deposit, and at the building permit stage. If you are asked for a deposit and have not been given an HII certificate, that is the moment to stop and ask why.
The teeth behind it
This is not a soft requirement. A builder who fails to take out HII as required can be prosecuted and fined, and may risk their registration. The obligation is taken seriously precisely because HII is the safety net that catches owners when a builder fails, and a builder trading without it has removed that net without telling the person standing under it.
Buying a home built in the last six years
This is the part buyers miss. HII protects subsequent owners too, for the balance of the cover period. If you are buying a house built within the last six years, the original HII policy may still be live, and it may be your protection against structural defects that emerge after you move in.
Ask for the HII certificate as part of the purchase. It tells you the policy exists, who the insurer is, and when the six-year structural cover expires. If the home was built by an owner-builder and sold within the relevant period, there are separate HII obligations on that owner-builder, and the same question applies: where is the certificate.
How it fits the bigger picture
HII sits alongside the other builder-accountability checks worth making before and after a build: whether the builder is actually registered, whether they built to the approved plans, and whether the work was properly supervised. Insurance is the backstop for when those fail.
Where a defect emerges on a newer home and the builder will not rectify it, HII may be the route to recovery if a relevant circumstance applies, and the broader dispute path is set out on our building disputes page. On any purchase, a pre-purchase inspection finds the defects; the HII certificate tells you what protection stands behind them.
The gap it exists to fill
Home indemnity insurance exists to cover a specific and frightening gap: what happens to a homeowner when the builder is no longer there to honour their obligations. Building work carries warranties and obligations, the builder is responsible for defects and for completing the work, but those obligations are only worth as much as the builder's ability to meet them. If a builder dies, disappears, or becomes insolvent partway through a job or during the warranty period, the ordinary recourse against them evaporates, and without some other protection the homeowner is left carrying the cost of incomplete or defective work alone. Home indemnity insurance fills that gap. It steps in providing cover to the homeowner where the builder cannot be pursued because they are dead, insolvent, or have disappeared.
It is worth understanding that this insurance is a last resort rather than a first port of call. It responds in the defined circumstances where the builder is genuinely unavailable, death, disappearance, insolvency, not simply where there is a dispute with a builder who is still trading and can be pursued directly. In an ordinary defect dispute with a solvent builder, the homeowner's recourse is against the builder. The insurance is there for the worse case, where that recourse has vanished, and it is precisely because that worse case is so devastating for a homeowner that the requirement to have the cover in place exists.
When the cover is required, and the threshold
The requirement to provide home indemnity insurance attaches to residential building work above a certain value, and the builder is required to have the cover in place before taking payment or starting work on a job that crosses that threshold. The threshold matters because it determines which jobs carry the protection: work below it does not require the cover, work above it does. For an owner commissioning building work, this is one of the things to confirm is in place, because a builder who has not arranged the required cover on a job that needs it has skipped a legal obligation and left the owner exposed on exactly the risk the insurance exists to manage.
This connects to the value-of-work question, because the threshold is a value threshold, and a job whose value sits near it, or that grows past it through variations, needs the cover assessed against the real value of the work. It is one more reason the declared value of building work matters beyond the levies: it determines whether this protection is required, and understating the value to slip beneath the threshold would leave the owner without cover they should have had. For an owner, the practical step is simply to confirm that the required home indemnity insurance is in place before work starts on a job of significant value, and to keep the certificate, because it is the evidence the protection exists. Keep the certificate.
Why it matters when buying a recently built home
Home indemnity insurance matters not just to people building but to people buying a home that was built in the relatively recent past, because the cover runs for a defined period after the work, and a buyer of a home still within that period may inherit the benefit of it. If you are buying a home that was built within the last several years, the question of whether home indemnity insurance was in place for its construction, and whether the cover period still has time to run, is a genuine part of the due diligence, because it bears on what protection you would have if a significant structural defect emerged and the original builder could not be pursued.
This sits alongside, rather than replacing, the inspection of the home's physical condition. An inspection tells you the state of the house now; the insurance question tells you what recourse might exist if a serious latent defect emerged later and the builder was gone. For a home built in the last several years, both are worth understanding: the condition, through an inspection, and the protections that attach to recent building work, through confirming the insurance and the documentation with your settlement agent. Together they give a buyer of a near-new home a fuller picture of both what they are buying and what would happen if something built into the house turned out to be wrong.
Common questions
What is home indemnity insurance?
HII protects a homeowner and subsequent owners against financial loss if a builder cannot complete the work or meet a valid claim for faulty work because of death, disappearance or insolvency. It covers structural defects for six years from practical completion.
When must a builder provide the HII certificate?
Before accepting any payment or commencing work. A copy is also lodged with the building permit application, and the permit authority can refuse the application without it.
Does home indemnity insurance protect me when buying an existing home?
Yes, for the balance of the six-year cover period. If you buy a home built within the last six years, the original HII policy may still protect you against structural defects.
This comes up on every pre-purchase building inspection and practical completion (pci) inspection we carry out.
Read next: the name on the sign may not be the business building your house and your builder has to build the house that was approved.
Sources
Read rather than recalled. Summarised here; the documents themselves are Crown copyright and are linked rather than reproduced.