If you are contracting for a newly built home, you may have heard about Home Warranty Insurance or Builders Warranty. It is crucial that you understand everything about this type of warranty so you will know what to expect and how to proceed if things should happen.
To help you get started, here are the Frequently Asked Questions about Builders Warranty Insurance:
What is it?
This type of insurance will protect you as a homeowner from troubles with work from loss of deposit to defective work and failure to start or finish the job. When these things happen, your first step is to recover your costs directly from the builder. Builders Warranty is usually required when you are building a house. Depending on what state you live in, Builders Warranty is also required for renovations.
Why consider this?
Builders Warranty insurance is created to protect you against defective or incomplete workmanship in the event that the builder dies, disappears, becomes bankrupt or deregistered.
Is it all the same?
Builders Warranty differs significantly from one state or territory to another. There have been a lot of debates and criticism about it. Some state or territory made changes in recent years. In general, many argue that in some states, the compensation from this insurance is unattainable.
Homeowner protections are strongest in Queensland where the BSA (Building Services Authority) manages everything from licensing to dispute management. When you think about Victoria and NSW, they have different arrangements. In these areas, the home warranty insurance is governed by state-mandated home insurance funds – VMIA (Victorian Managed Insurance Authority) and the NSW Home Warranty Insurance Fund.
Is this mandatory?
The Builders Warranty Insurance Australia is mandatory in all of the states – except for Tasmania.
When will this insurance apply?
The Builders Warranty is required to be in place before the start of construction. The insurance will also provide coverage during the process of building and for a period of several years after the completion.
The cover is normally divided into two different parts – a shorter period of cover (for non-structural defects) and a longer period of cover (for structural defects). A shorter period of cover is usually 2 years while the longer period of cover is usually 6 years.
How to find a good builder?
Many homeowners found it the hard way not to rely on Builders Warranty for their protection because this is considered a last-resort insurance scheme. Having this in mind, you need to tread carefully when shopping around for a trustworthy builder.
The best way to find a good builder is through personal references. Asking for recommendations from the people that you trust can help because these days, licensing is not a guarantee of accountability or reliability. If you cannot find personal references, you need to ask the builder to provide contact details for recently completed jobs.
Wrapping it up
Keep in mind that Builders Warranty is mandatory (except for Tasmania). This means that you need to ensure this before you make any payment or deposit. If you want to know more, you need to check with your local authority especially if the builder’s obligation is unclear to you.