If you’re planning on building or renovating a home in Australia, you’ll need to be aware of domestic building insurance. This type of insurance provides protection to homeowners in case their builder is unable to complete the project or if there are defective works that cannot be fixed. Domestic building insurance is mandatory for all domestic building projects over $16,000, and builders are required to purchase it on behalf of the homeowner.
Domestic building insurance is designed to provide peace of mind to homeowners and protect them against financial loss. It covers situations where the builder has died, disappeared, become insolvent, or failed to comply with a Tribunal or Court Order. If any of these situations occur, the insurance will cover the cost of completing the work or rectifying the defective works, up to the policy limit. It’s important to note that domestic building insurance only covers the homeowner, and not the builder or subcontractors.
If you’re a builder, it’s essential that you purchase domestic building insurance for your clients. You must provide your client with a copy of the policy and a certificate of currency covering their property before you take a deposit or any other money. Failure to do so can result in penalties and fines. It’s also important to ensure that you comply with all the requirements set out by your state or territory’s building authority. By doing so, you’ll be able to protect your clients and your business.
Understanding Domestic Building Insurance
If you are planning a building project, it is important to understand what domestic building insurance (DBI) is and how it works. DBI is a type of insurance that provides cover for homeowners in case of incomplete or defective work carried out by a builder or tradesperson who has died, disappeared, or become insolvent. The purpose of DBI is to protect homeowners from financial losses that could arise from such situations.
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Purpose of Domestic Building Insurance
DBI is a statutory product that provides insurance cover for residential building works in Victoria over $16,000. The policy covers construction defects and incomplete works for a period of six years after the completion of the work. It also provides cover for loss or damage caused by the builder’s failure to comply with the building contract, such as failing to complete the work on time or using poor quality materials.
How It Works
Builders are required to purchase DBI before taking a deposit or any other money from the client. The builder must provide the client with both a copy of the policy and a certificate of currency covering the client’s property. The policy must be in force before the builder starts any work on the property.
If the builder becomes insolvent, disappears, or dies before completing the work, the homeowner can make a claim on the policy. The claim can be made for the cost of completing the work or rectifying any defects caused by the builder’s work. The policy also covers the cost of alternative accommodation if the homeowner is unable to live in the property due to the builder’s failure to complete the work.
Domestic Building Insurance in Victoria
If you are planning to build or renovate a home in Victoria, you need to be aware of the Domestic Building Insurance (DBI) scheme. This insurance is mandatory for all domestic building projects valued at over $16,000. In this section, we will provide you with an overview of the DBI scheme in Victoria.
Victorian Managed Insurance Authority
The Victorian Managed Insurance Authority (VMIA) is the government agency responsible for managing the DBI scheme. Builders in Victoria are required by law to take out DBI for work valued at more than $16,000. The VMIA provides insurance cover to builders and homeowners, and also manages the claims process.
Domestic Building Insurance Eligibility in Victoria
To be eligible for DBI in Victoria, you need to meet certain criteria. The Domestic Building Contracts Act 1995 sets out the eligibility requirements for DBI. Builders must hold a valid DBI policy before they can take a deposit or commence work on a domestic building project. They must also provide their client with a copy of the policy and a certificate of currency covering the client’s property.
Homeowners are not required to take out DBI, as it is the responsibility of the builder to purchase the insurance on their behalf. However, homeowners should ensure that their builder has a valid DBI policy before commencing any building work.
Coverages and Exclusions
When it comes to domestic building insurance, it’s important to understand what is covered and what is excluded in your policy. This section will outline the coverages and exclusions of domestic building insurance.
Structural and Non-Structural Defects
Domestic building insurance provides protection to homeowners from financial losses arising from incomplete or defective work carried out by a builder or tradesperson who has died, disappeared, or become insolvent. This protection extends to future owners of the property, subject to time limitations. The insurance covers the costs of fixing structural defects for six years and non-structural defects for two years, up to a maximum of $300,000.
Structural defects are defined as defects that affect the safety and stability of the building, while non-structural defects are defined as defects that do not affect the safety and stability of the building. Examples of structural defects include foundation issues, roof damage, and wall cracks. Examples of non-structural defects include faulty plumbing, electrical problems, and cosmetic issues.
Tribunal or Court Order Covers
In some cases, a tribunal or court order may be required to rectify defective works. Domestic building insurance provides coverage for the costs of complying with a tribunal or court order, up to the maximum amount of coverage specified in the policy.
It’s important to note that domestic building insurance does not cover defects that are a result of normal wear and tear, or defects that are a result of homeowner negligence. Additionally, the insurance does not cover defects that are a result of work carried out by the homeowner or a person who is not a registered builder.
Domestic Building Contracts
If you are planning to carry out domestic building work in Victoria, it is important to understand the different types of domestic building contracts. The Domestic Building Contracts Act 1995 (DBCA) regulates domestic building contracts in Victoria. Under this act, there are two main types of domestic building contracts: Major Domestic Building Contract and Owner Builder Contracts.
Major Domestic Building Contract
A Major Domestic Building Contract is a contract for domestic building work where the contract price is over $10,000. This type of contract is usually used for larger building projects, such as building a new home or major renovations. The DBCA requires that a builder must provide the owner with a written contract that includes specific information, such as the contract price, plans and specifications, and the builder’s details.
Owner Builder Contracts
An Owner Builder Contract is a contract for domestic building work where the owner is also the builder. This type of contract is usually used when the owner wants to carry out the building work themselves. The DBCA requires that an owner builder must provide the building surveyor with a certificate of consent before any building work commences. The certificate of consent confirms that the owner builder has the necessary knowledge and skills to carry out the building work.
It is important to note that an owner builder must take out domestic building insurance if the contract price for the carrying out of domestic building work is more than $16,000. The insurance covers the owner for any loss or damage caused by the owner builder’s failure to complete the work or by any defects in the work. The insurance must be taken out before any work commences and a certificate of insurance must be provided to the building surveyor.
Insurance Process and Procedures
Purchasing a Policy
As a builder, you are required by law to take out domestic building insurance (DBI) for any work valued at more than $16,000 in Victoria. To purchase a DBI policy, you must follow certain procedures.
Firstly, you need to obtain a Certificate of Currency from your DBI insurer. This certificate is proof that you have DBI coverage for the work you are undertaking. You must provide this certificate to the client before you start any work.
Secondly, you need to provide the client with a copy of the DBI policy within 5 days of receiving the premium. This policy outlines the terms and conditions of the insurance coverage.
Thirdly, you need to collect a deposit from the client before starting any work. This deposit must not exceed 10% of the contract price or $20,000, whichever is less.
Lastly, you need to ensure that the DBI policy is valid for the entire duration of the building work. If the policy expires before the work is completed, you must renew it to ensure that you are covered for any defects or incomplete work.
Claiming Insurance
If the client experiences any financial loss due to incomplete or defective work carried out by you, they can make a claim on your DBI policy. The following procedures must be followed:
Firstly, the client must provide written notice to you of the defect or incomplete work. This notice must be provided within 10 days of becoming aware of the defect or incomplete work.
Secondly, you must acknowledge receipt of the written notice within 14 days.
Thirdly, you must carry out any repairs or rectification work required to fix the defect or incomplete work. If you fail to carry out the repairs or rectification work, the client can make a claim on your DBI policy.
Lastly, if you fail to carry out the repairs or rectification work, the client can make a claim on your DBI policy. The client must provide written notice to your DBI insurer within 180 days of becoming aware of the defect or incomplete work.
Additional Considerations
When it comes to domestic building insurance, there are a few additional considerations that you should keep in mind. Here are two important ones:
Seeking Legal Advice
If you are unsure about your legal rights and obligations when it comes to domestic building insurance, it may be a good idea to seek legal advice. A lawyer who specializes in construction law can help you understand your rights and obligations under the law, as well as help you draft contracts that protect your interests.
Public Liability Insurance
In addition to domestic building insurance, it is also important to consider public liability insurance. This type of insurance provides protection in case someone is injured or their property is damaged as a result of your building works. While it is not a legal requirement to have public liability insurance, it is strongly recommended, especially if you are a builder or contractor.
Building Works and Extensions
When it comes to building works and extensions, domestic building insurance is an essential requirement. This includes construction, renovation, removal, or demolition of a home. In this section, we will discuss some of the building works and extensions that require domestic building insurance.
Renovations and Extensions
If you are planning to renovate or extend your home, you will need to take out domestic building insurance. This includes any work that involves altering the structure, such as adding a new room, changing the layout, or extending the existing structure. It is important to note that any changes to the existing structure must comply with the building regulations and local council requirements.
Before starting any work, it is important to have plans and specifications drawn up by a qualified architect or building designer. This will ensure that the work is carried out to the required standards and complies with all the necessary regulations.
Landscaping and External Works
Landscaping and external works such as paving, fencing, garages, swimming pools, and spas also require domestic building insurance. These works involve altering the external appearance of the property and can have a significant impact on the value of the property.
When planning landscaping and external works, it is important to consider the materials that will be used. Using high-quality materials will ensure that the work is carried out to a high standard and will last for many years.
Regulations and Compliance
When it comes to building a new home or renovating an existing one, it is important to comply with the relevant regulations and obtain the necessary permits. Failure to do so can result in fines, legal action, and even the demolition of the building. One key aspect of compliance is obtaining domestic building insurance (DBI) if required. In Victoria, builders are required by law to take out DBI for work valued at more than $16,000 1.
Building Permits and Surveyors
Before you start any building work, you need to obtain a building permit from your local council or a private building surveyor. A building surveyor is a professional who is responsible for ensuring that building work complies with the relevant regulations and standards. They will assess your plans and issue a building permit if everything is in order. During the construction process, the surveyor will conduct inspections to ensure that the work is being carried out in accordance with the plans and specifications.
It is important to engage a qualified and experienced building surveyor to ensure that your building work complies with the regulations. The Victorian Building Authority (VBA) maintains a register of building surveyors who are authorised to issue building permits and carry out inspections.
As an owner-builder, you can apply for a permit and carry out the building work yourself. However, you will need to demonstrate that you have the necessary skills and knowledge to do so. You will also be responsible for ensuring that the work complies with the regulations and standards. If you engage a builder to carry out the work, they will be responsible for obtaining the necessary permits and ensuring compliance with the regulations.
Guarantees that Apply Automatically
DBI provides protection for homeowners in case the builder dies, disappears, or becomes insolvent. It covers the cost of rectifying any defects in the building work, including structural defects for six years and non-structural defects for two years 3. The insurance is taken out by the builder and applies automatically to the homeowner.
If the builder is not covered by the required insurance, they may be liable for fines and legal action. In some cases, the homeowner may be able to claim compensation through the Victorian Civil and Administrative Tribunal (VCAT).
Frequently Asked Questions
What are the different types of insurance required for construction work in Australia?
In Australia, there are several types of insurance that are required for construction work, including public liability insurance, workers’ compensation insurance, and domestic building insurance. Public liability insurance covers you against claims for property damage or personal injury caused by your business activities. Workers’ compensation insurance provides cover for employees who are injured or become ill as a result of their work. Domestic building insurance is required for all residential building work over $16,000 in Victoria.
How long does building insurance last in Victoria?
In Victoria, domestic building insurance is valid for six years from the date of issue. This means that if you sell your property within six years of the completion of the building work, the new owner will be covered by the insurance policy.
What is the cost of domestic building insurance in Victoria?
The cost of domestic building insurance in Victoria varies depending on the value of the building work. The premium is based on a percentage of the total cost of the building work, with the percentage decreasing as the value of the work increases.
What exemptions are available for domestic building insurance?
There are a few exemptions available for domestic building insurance in Victoria. These include building work carried out by an owner-builder on their own property, building work carried out on a property that is not intended for residential use, and building work carried out by a registered builder on their own home.
What is the role of the Ministerial Order in domestic building insurance?
The Ministerial Order sets out the requirements for domestic building insurance in Victoria. It specifies the types of building work that require insurance, the minimum level of cover required, and the circumstances in which exemptions may be granted.
What is the HIA’s involvement in domestic building insurance?
The Housing Industry Association (HIA) provides information and support to builders and homeowners in relation to domestic building insurance. HIA members can access insurance policies through the BuildVic Domestic Building Insurance Portal, or contact HIA Insurance Services for further assistance.
Wrapping Up
Domestic building insurance is a crucial safeguard for homeowners and builders alike. This article has provided an overview of its importance and requirements. If you have any further questions or need assistance with domestic building insurance, don’t hesitate to contact SQM Architects. Our experienced team is here to provide expert guidance and support. Reach out to us today for personalised advice and ensure you have the proper insurance coverage for your project.
How to gain professional insights for FREE, no strings attached
Unsure about your next building project? Get expert advice, no strings attached! Take advantage of our FREE consultation at SQM Architects. We’re here to answer your queries and bring clarity to your vision. With our transparent process and reputable track record, your project is in capable hands.

About the Author
Sammi Lian, the founder of SQM Architects, has dedicated over 15 years of her career to the architectural industry. She works diligently with property developers, builders, investors, and homeowners, using her skills and knowledge to facilitate their building design needs.