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Why Do You Need Builder's Warranty Insurance?
websitebuilder • Dec 09, 2020
If you've recently set up your own building business, you might be focusing on small to medium jobs to start with. If those jobs have gone well, you may be at the stage where you want to branch out to take on bigger projects.
While you probably have the employees, subbie contacts, equipment and company infrastructure to work on larger projects, you also need to think about how bigger contracts might affect your business insurance. For example, at this stage, you may need to take out Builder's Warranty insurance for some jobs.
How does this insurance work, and why should you consider taking it out?
What is Builder's Warranty insurance?
Builder's Warranty coverage protects people who hire a contractor or company to do high-value building work. The insurance covers customers if they have certain problems with the project, or the person or company they hire to do the job.
Builder’s Warranty is designed to help customers who are unable to rectify a problem for specific reasons, say if their builder disappears, passes away or goes out of business. A policy is valid during the build itself and for a number of years afterward.
Typically, you only need this type of insurance if you're working on a project over a certain value. This amount varies from state to state. For example, WA sets a residential building limit of $20,000. Once a project cost reaches this limit, then you may need Builder’s Warranty insurance coverage.
Why take out a Builder's Warranty policy?
While Builder's Warranty insurance protects the person who hires you, you are required to take out the policy. Your customer claims from the insurer if something goes wrong, but the person or company that does the work has to arrange the coverage and pay for it.
Typically, most states require licensed builders to have this kind of insurance, subject to their own rules and regulations. If you try to bypass the system and go ahead without this statutory coverage, then you may be fined or may even lose your license.
In some cases, you may also find that you can't go ahead with a project until you have proof of warranty coverage. For example, this may be a condition of planning permissions and permits. You might have to provide a copy of a policy during the application process. If you don't have a policy when you apply, you may not get permission to proceed.
Plus, your clients may not be able to give you the go-ahead to start work, or to pay any deposits or money towards the project, until you give them a copy of your valid policy. So, organise this insurance as early as possible to avoid unnecessary delays!
Builder's Warranty insurance is also a useful marketing tool. If you advise potential customers that you will arrange this cover if the project requires it, you give them peace of mind that you are a reputable builder. This is especially important if you are a newer or smaller business.
Although you may not have built up a large portfolio of work yet, especially for larger or more complex projects, you might find it hard to compete with larger companies or contractors who have been in business for longer than you. If you meet your statutory responsibilities and make potential customers aware that you will protect them against unforeseen problems in the future, they may feel more confident hiring you to do the job.
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Terms, conditions, limits and exclusions apply to the products referred to above. The information provided here is general advice only and has been prepared without taking into account your objectives, financial situation or needs. You should consider these, having regard to the appropriateness of this advice, and the relevant Product Disclosure Statement, available by calling us on (08) 9302 1388, before deciding to acquire, or to continue to hold, this product.
Ph: 08 9302 1388
Email: info@westralianinsurance.com.au
Lugarno Holdings Pty Ltd trading as Westralian Insurance
Address: Suite 12/1 Irwin Road
Wangara WA 6065
Monday to Friday 8:00am – 5:00pm
Lugarno Holdings Pty Ltd trading as Westralian Insurance
ABN 27 110 436 005
AFSL No. 331147
