As a licensed builder there are plenty of risks that you take on, and it’s important to cover yourself with the right insurance.
We’ve been helping builders from all over Australia since 2010, and have put together a comprehensive guide on which types of insurance a builder needs.
If you prefer to speak with an expert, call us on 1800 808 800 and one of our builders insurance brokers will be ready to assist.
What insurance does a builder need?
The answer to this question will depend on which states and territories you’re building in, but to start with we’ll look at the policies you’ll need regardless of your location.
The builders insurance policies you’ll need Australia-wide include the following. Click the link to jump straight to the relevant section.
- Public Liability Insurance
- Contract Works Insurance
- Design & Construct Insurance (if you’re responsible for the design)
It’s also compulsory to hold builders warranty insurance in the states you are undertaking building work in.
Other highly recommended policies include:
Some state governments operate these schemes through their own agencies, whilst others use insurance brokers. We’ll do through each of the states below.
Next up we’ll delve further into each of the different types of insurance that builders require.
Builders Public Liability Insurance
For any self-employed person in the construction industry, public liability insurance is the most important form of cover.
This is the policy that will protect you in the event that your business activities result in property damage or personal injury to another person.
Even if you’re subcontracting out all of the physical building work, you are still responsible for the site and in many cases will be dragged into any claim involving the subcontractors.
Tip for builders:
As a builder you’ll most likely have a number of subcontractors working on your projects. It’s important to remember that your public liability insurance will not cover them if they are found to be responsible for the loss or damage.
Your subcontractors must hold their own public liability insurance, and we strongly recommend checking their insurance each year.
In some cases your own policy will have a requirement that you check the insurance for any of your subcontractors.
Contract Works Insurance
In some ways contract works insurance is similar to public liability insurance, however there is a very important difference.
Public liability covers incidents where you have been negligent, i.e. your actions (or lack of action) was the cause of the property damage or personal injury.
Contract works insurance covers incidents where you were not negligent.
The best way to demonstrate the difference is with a claims examples relevant to builders.
Let’s say you’re working on a big renovation project for a client, and over the weekend a big storm comes through and causes significant water damage to the property.
Scenario 1 – You took steps to keep the site safe
Knowing that there was the possibility of heavy rain over the weekend, you were extra careful in using well-secured tarps to keep the structure as waterproof as possible.
Despite your very best efforts, the storm and the winds were so strong that the structure still suffered significant water damage.
In this scenario your public liability insurance wouldn’t respond, as there was no negligence involved.
You did your best to secure the building, and you’re not at fault for the damage.
Despite not being at fault, you may still be responsible for the repair costs since the building was under your care at the time.
This is where contract works kicks in. Whilst your public liability insurance would be of no benefit, your contract works insurance certainly would be.
Scenario 2 – You didn’t attempt to keep the site safe
You knew there was the possibility of heavy rain, and you knew the structure was at risk of water entering, but you chose to take no action.
Sure enough, the rain came along and caused significant water damage to the building.
In this scenario, you would be covered under your public liability insurance, as the damage to the property was largely a result of your negligence, i.e. your failure to secure the site whilst knowing that rain was a possibility.
Other examples of loss or damage to a building project, that doesn’t involve your negligence, include events such as:
- Theft of materials
- Malicious damage
- Fire (including arson)
- Storm
These can all be covered under your contract works insurance.
Design & Construct Insurance
If you are involved in the design of the building – including if you’re subcontracting out the design work – you are opening yourself to additional risks.
These risks relate to areas such as:
- Design or specification errors
- Incorrect or inaccurate advice
- Breach of professional duties
- Negligence
Typically these risks are covered by professional indemnity insurance, but in the building industry there is a specific form of coverage known as design and construct insurance, or simply D&C insurance.
This type of insurance will cover you for risks that don’t relate to your physical construction of the building, but more around the design and advice provided.
Builders Warranty Insurance
Each of the policies we’ve detailed so far can be looked after by Trade Risk, irrespective of which state of territory you are building in.
Builders warranty insurance operates quite differently depending on which state you are located in, and in some cases insurance brokers aren’t involved at all.
Many states now have their own names for builders warranty insurance, which we have detailed below along with the relevant links:
| State | Scheme Name |
|---|---|
| NSW | Home Building Compensation 🔗 |
| Victoria | Domestic Building Insurance 🔗 |
| Queensland | Home Warranty Scheme 🔗 |
| South Australia | Building Indemnity Insurance 🔗 |
| Western Australia | Home Indemnity Insurance 🔗 |
| ACT | Residential Building Work Insurance 🔗 |
| Tasmania | Home Warranty Insurance 🔗 |
| Northern Territory | Residential Building Insurance 🔗 |
Trade Risk does not get involved in builders warranty insurance regardless of the state. We recommend using the links above to obtain further information.
Personal Accident Insurance
This is the first of the insurance types we will detail that aren’t compulsory for builders, but remain strongly recommended.
Personal accident insurance is a form of income protection that can cover your income for a period of time whilst you’re unable to work.
A standard policy will cover a builder whilst unable to work due to injury, and we strongly recommend adding the illness option to cover yourself whilst unable to work due to illness.
There are many options when it comes to personal accident insurance, including the waiting period, benefit period and benefit amount. You Trade Risk broker can run through each of these with you.
Tip for builders:
Whilst personal accident insurance provides a great level of protection for tradies, some builders may require a more comprehensive form of protection.
This is largely due to the increased debts and liabilities that a builder may hold.
For this reason it may be prudent to consider comprehensive income protection, trauma, TPD and life insurance.
As commercial insurance brokers we do not deal in these forms of cover, however we can refer to a financial planner who can assist.
Tool Insurance
Tool insurance is a no brainer for any tradie or builder, thanks to the ever-increasing level of tool theft in Australia.
A tool insurance policy can cover your tools and equipment for loss or damage due to fire, storm, vehicle collision or theft.
These definitions can vary from policy to policy, so we recommend speaking with a Trade Risk broker about the different policies and options.
It’s important to remember that in the event of a claim, you will need to provide evidence of ownership for each item being claimed on, so make sure you keep those invoices and receipts.
Commercial Motor Insurance
Whilst builders can insure their utes, vans and trucks through any old insurer, it’s worth considering a proper commercial motor insurance policy.
The types of policies you can buy direct from insurers can be quite limited in how much coverage they provide for fit out and signage.
If you ute, van or truck has $10k worth of racks and toolboxes, you might find that standard insurance policies only cover a fraction of the replacement cost.
The same goes with signage. Whilst a full van wrap will cost you well over $5k, most standard policies won’t cover anywhere near that amount.
A proper commercial motor policy will ensure that you vehicle is properly covered for business use, and that your accessories are covered for their full replacement value.
There is also sharper pricing available when you combine multiple vehicles into a fleet policy.
Other Insurance Required by a Builder
There are plenty of other forms of business insurance that a builder may need, depending on the size and structure of their business.
Some of these include:
- Commercial property owner’s insurance
- Contents and stock insurance
- Management liability insurance
- Cyber insurance
- And more…
If your building business is operating from premises that it owns, or that perhaps you own through a trust or super fund, you’ll need commercial property owners insurance.
You’ll also need to insure any contents or stock that is kept on the premises.
Management liability insurance tends to kick in as your business and number of staff grows, and cyber insurance becomes more important as the amount of data you hold grows.
There are many risks involved in operating a building business, and there are plenty of different insurance types available to cover those risks.
The trick is knowing which risks you’re exposed to, which policies you need to cover them, and ultimately which risks you need to insure verses which risks you’re willing to manage without insurance.
Here at Trade Risk our insurance brokers have been helping builders with the insurance types they need for over a decade.
Our team can review your insurance needs regardless of whether you’re about to make the step up from chippy to builder, or if you’re a well-established builder operating across the country.
For more information or to book in a free consultation please call our office on 1800 808 800 or hit the button below to make an online enquiry.
Our team knows what insurance a builder needs, and we’re here ready to help you.
