In Victorian builders are required to take our Domestic Building Insurance (DBI) (also commonly referred to as Builders Warranty Insurance) for domestic building projects with the value more than $16,000.

Builder’s warranty insurance provides cover for loss or damage to homeowners or subsequent homeowners if the domestic building work is defective or incomplete and only if the builder has disappeared, died or become insolvent or for the insurance certificates that were issued after 1st July 2015, the builder has failed to comply with a Tribunal or Court Order.

How long am I covered under the insurance policy?

The insurance cover depends on whether loss or damage is arising from non-structural defects or causes other than non-structural defects.

  1. Non-Structural Defects: 2 years after the work is completed or the date the building contract is terminated, whichever is the earlier.
  2. Other Causes (Structural Defects): 6 years after the work is completed or the date the building contract is terminated, whichever is the earlier.

How much will the insurance company pay in the event of the claim?

  1. For Certificates issued on or after 1 July 2014 – The insurance company will not pay more than $300,000 in total for all claims made under this policy for each home.
  2. For Certificates issued on or before 30 June 2014 – The insurance company will not pay more than $200,000 in total for all claims made under this policy for each home.

Do I have to pay for any excesses?

Yes, you have to pay the following amounts for each claim under the policy:

  1. Any amount for claims under $500 made between 3 to 12 months after completion of the work
  2. The first $500 for claims made between 1 to 3 years after completion of the work
  3. The first $750 for claims made between 3 to 5 years after completion of the work
  4. The first $1000 for claims made later than 5 years after completion of the work

What information is required when assessing and reviewing my eligibility?

Assessment considers different risks such as the risk that the builder becomes insolvent or disappears and the risk that the builder may undertake some domestic building works which are defective or might not be completed.

The assessment of the builder’s eligibility will include reviewing not only the builder’s but also its directors’ and/or partners’ previous building performance and their capabilities regarding the type and quantity of the projects they are willing to undertake and their technical and management skills.

The assessment also consists of reviewing builder’s business history and recent financial reports. The business’s key financial indicators should demonstrate solvency and ongoing financial viability.

The financial assessment process may include (but is not limited to) the following:

  • Net turnover growth
  • Net Tangible Assets
  • Shareholders’ Funds / Sales
  • Profit margins both Gross & Net
  • Work in Progress reports
  • Cash flow forecasts against actuals
  • Creditor payment days and debtor collection days
  • Working capital position
  • Return on equity and assets
  • Statement of assets & Liabilities for all directors or partners
  • Trust deeds

What is considered Structural Works?

If the alteration works include any of the items listed in the Structural column of the table below or if the alteration includes both Structural and Non-Structural items, it should be classified as structural. In all other cases the alteration works should be classified as Non-Structural.

Structural Non-Structural
Roof installation Cabinet joinery (separate contracts)
Decking Painting
Fencing Plastering
Tuck Pointing Wardrobe fit-out
Retaining Walls Hardware Installation
Patio Tiling
Balcony Carpeting
Kitchens-working wet areas
Bathrooms -working wet areas
Electrical
Rewiring
Brickwork
Pergolas ( if Building Permit is required)

Multiple Building Works

Development of 3 or more dwellings on one site where common works such as construction of a road, adjoining fire rated walls or common driveway are required is considered to be Multiple Building Works.

There are three scenarios associated with Multiple Building Works as explained below. You should provide the required documents for review before any warranty certificates can be issued for Multiple Building Works;

Scenario 1

There is Contract for Common Property Works with a Body Corporate

One Certificate is issued for whole contract. The required documents are as follow:

A scope of works and any relevant plans/specifications (confirming common property works)

Scenario 2

The Multiple Building Works is built for multiple owners with common property works and there are separate contracts with each individual owner

One Certificate is issued for each dwelling. The required documents are as follow:

Site plans and any relevant specifications (confirming common property works)

Scenario 3

The Multiple Building Works is built for a single owner on a single contract

One Certificate is issued for each dwelling. The required documents are as follow:

Proof of available funds. This could be letter of offer from the financier or bank statement depends on if project is to be fully or partially self-funded

Suite 18/296
Bay Road,
Cheltenham, VIC, 3192

 
Phone 03 9585 6377
enquiry@fdbeck.com.au