Why you need to ensure your builder has a Domestic Builders Insurance

In recent years various construction companies have gone into liquidation, placing homeowners in limbo. To try and negate this in future, the Victorian government has amended the Building Act 1993 (Vic) to require builders to take out Domestic Builders Insurance (DBI ).

What is the DBI?

DBI covers up to $300,000 for any financial losses arising from incomplete or defective work. Builders are required to take out the insurance for any work over the value of $16,000.

The insurance only applies in certain circumstances. These circumstances are, if the builder dies, disappears, or is declared insolvent. The insurance covers structural defects for six years following the completion of work or termination of building contract, and non-structural damage for two years  following the completion of work or termination of building contract. The insurance can also cover a failure to maintain the quality or standard specified in the contract.

When does the builder have to get a DBI?

The builder is required to get the policy upon signing a major domestic building contract (over the value of $16,000). The contract is conditional upon the client receiving a copy of the policy.

The builder must provide the client with a copy within 7 days of receiving the policy.

This means that until the client receives a copy of the insurance policy, then the contract has not been fulfilled. Additionally, it gives rights to the owner to terminate the contract if that 7-day period passes and the client does not receive a copy of the policy.

Do you have to pay the deposit if the builder has not provided proof of the DBI?

The builder cannot demand any money from the client without providing a copy of the policy. This means that you do not need to (and should not) pay any deposit without having a copy of the policy. It is good practice to ensure that the policy is current and correct too before paying any monies. 

How can you ensure a builder has a current DBI?

A client can conduct a Policy Verification Search (by clicking here) to ensure that the builder has taken out insurance.

Risks if you pay a builder who does not have a DBI certificate

Any money transferred to a builder who does not have a valid DBI certificate may be at risk of becoming unrecoverable by the client.

If you would like more information or assistance regarding a contract, please contact our office at (03) 9707 1155 or admin@wslegal.com.au.