What is Home Owners Warranty insurance?

Home Owners Warranty insurance is a mandated insurance. It is an insurance a builder must have, and provide evidence of to you.

Home Owners Warranty insurance is a mess in Australia, and varies extensively from state to state.

It is variously underwritten by private insurance companies, or - where they have (frequently) pulled out of the market - by the mandating government body itself. All states are reviewing their position, so any answer we give you today could be different tomorrow.

NSW are currently considering up to 50 different changes.
QLD has a new building commission and changes to their insurance regime is inevitable.
SA have just lost their underwriter and is in band-aid management.
All we can say is check their website before and on the day you sign to know what's legal

In theory it works.

The Home Owners Warranty insurance scheme sits at the end of a comprehensive consumer protection regime for homeowners undertaking residential building projects of or above a certain value.

Where a builder is unable to honour their commitments under a contract due to insolvency, death or disappearance, Home Owners Warranty insurance provides a safety net for homeowners including subsequent purchasers.

Similarly, where a builder is unwilling to honour such commitments, and their licence is suspended for failing to comply with a money (compensation) order, in favour of the homeowner made by a Court, Home Owners Warranty insurance provides protection to the homeowner.

Home Owners Warranty insurance needs to be provided by:
A builder or tradesperson before taking any money (including a deposit) from a homeowner (including an owner-builder) under a residential building contract, and before starting any work under that contract.
A 'spec' builder before starting any residential building work on a property owned by the builder.
A developer before entering into a contract for the sale of a property, on which a builder is doing or has done residential building work for the developer.
An owner-builder (ie. a home owner who did owner-builder work under an owner-builder permit) before entering into a contract for sale of the property, on which residential building was done within the previous 6 years.