Answer · reviewed 2026-09-29

What does home building compensation (insurance) cover in NSW, and when must a builder provide it?

Short answer

HBC (home building compensation) insurance is mandatory in NSW for residential building work over $20,000 including GST: new homes, renovations of any size, and swimming pools. It is not a defects warranty. It only pays if the builder is insolvent, has died, disappeared, or has their licence suspended for breaching a court or NCAT money order. Cover is capped at $340,000. The builder must give you the certificate before you pay any deposit, and a pre-start deposit is limited to 10% of the contract price.

Who must carry it, and for what jobs

Any licensed building or trade business contracting direct with a homeowner, owner-builder or developer must hold home building compensation (formerly home warranty) insurance for residential work over $20,000 including GST, unless an exemption applies. That covers new homes and new apartment buildings up to three storeys, renovations of any home regardless of its height, and structures tied to a home such as a swimming pool, spa, garage or outbuilding. Sub-contractors to a principal contractor do not buy their own cover — the obligation sits on the business holding the contract with the homeowner, and that is why the certificate you should be shown always names the principal contractor.

What it actually pays for

The scheme pays for breaches of the statutory warranties in the Home Building Act 1989 — work that lacks due care or skill, does not match the plans or specifications, uses unsuitable materials, violates legal standards, or is not finished within a reasonable time. Critically, it is a last resort, not a day-to-day defects warranty: if your builder is still trading and able to resolve the issue, the law expects you to deal with the builder first, or go to dispute resolution. The insurer steps in only when there is genuinely no other party left able to meet the builder’s obligations.

The four triggers that unlock a claim

Builder becomes insolvent (bankrupt, voluntary or court-ordered liquidation)	Yes
Builder dies	Yes
Builder disappears and cannot be found or contacted	Yes
Builder’s licence is suspended for not complying with a court or NCAT money order in your favour	Yes

Those are the defined circumstances under which a homeowner can lodge a claim for losses on their own work. A builder who simply refuses to return calls, or who goes broke without a triggering event, may still leave you outside the scheme — which is why the certificate and the public register matter so much before you hand over money.

How long you are covered

Major (structural) defects	6 years from completion of the work
Other defects and warranty breaches	2 years from completion
Incomplete work, or work that never started	12 months from when the work stopped, or failed to start

The cover attaches to the property and follows it, so a buyer of a recently built or renovated home can also be protected for the remainder of the warranty period. In some circumstances there is extra time to lodge after a warranty period ends, subject to conditions, so a lapsed date is not always the end of the road.

The money limits that matter

Cover is capped at $340,000 per project (limits and excesses apply), so it is a backstop rather than full indemnity on a large build. On the deposit: a builder can seek at most 10% of the total contract price as a pre-commencement deposit, and any amount paid above that can fall outside recoverable cover. Progress payments are only protected when the contract sets out specific stages with percentages, or fixed "as invoiced" amounts backed by receipts for work already done. Upfront payments for plans and preliminary work generally sit outside the scheme, so that money is at greater risk if the builder folds.

The certificate is your proof — verify it

The builder must give you a certificate of insurance before they ask for or take any payment (including the deposit) and before work starts, and if it is not in place their demand for payment is not lawful under the scheme. Take the certificate number and check it on the free public HBC Check register, where you can also search by property address, contractor name or licence number to confirm the cover is genuine and whether any claims have already been paid. On an off-the-plan sale the developer must give you the certificate within 14 days of it being available, and you hold a right to cancel the contract if it is not.

What to collect before you pay

A signed contract for work over $5,000 is a legal requirement, and over $20,000 the contract must state the cost of the HBC cover, name the insurer, and flag the builder’s obligation to provide the certificate. Before money moves, confirm three things in writing: the builder’s name on the certificate matches the contracting party, the certificate number is live on HBC Check, and the pre-commencement deposit is exactly the 10% cap or less. Do all of that before the deposit, not after — once the money has gone and the builder is gone, the certificate is the difference between a claim and a write-off.

Sources

Home building compensation — for homeowners, NSW Government (State Insurance Regulatory Authority, SIRA). Checked 2026-09-29.
Home building compensation (HBC, formerly home warranty insurance), NSW Government (SIRA). Checked 2026-09-29.
Protecting yourself in case of builder insolvency, NSW Government. Checked 2026-09-29.
What is icare HBCF and why do I need it?, NSW Government (icare). Checked 2026-09-29.
Apply for home building compensation cover, Service NSW. Checked 2026-09-29.
Contracts for residential building work, NSW Government. Checked 2026-09-29.

Government fees are quoted from the government source. Market prices are the observed spread across the guides listed, not our estimate. Prices change; the checked date is when a human last looked.

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