Residential construction insurance — more precisely known as contract works insurance — protects builders, contractors and owner-builders against physical loss or damage to residential building projects during construction. It covers new home builds, renovations, extensions, knockdown-rebuilds and residential multi-unit developments.
For residential builders in Australia, contract works insurance is one of several essential insurance products. This guide covers what residential builders need to know about protecting their projects and their business.
A standard contract works insurance policy can cover a wide range of residential construction activities:
Whether you are building a single dwelling on a greenfield site or constructing homes across multiple subdivisions, contract works insurance covers the build from slab or foundation through to completion. For a builder constructing a $600,000 home in the Hills District of Sydney, the policy protects against storm damage to the frame, theft of fixtures and fittings delivered to site, fire damage to partially completed works, and liability if a passer-by is injured by falling debris.
Renovation projects carry additional complexity because there is an existing structure involved. The key consideration is ensuring the existing building is declared on the policy with an agreed value. A builder undertaking a $250,000 kitchen and bathroom renovation in a $900,000 Melbourne home needs the policy to note both the new works ($250,000) and the existing structure ($900,000) to ensure full protection.
Broker tip: For renovation projects, always confirm that the existing structure is noted on your contract works policy. A standard policy only covers the new works — if a fire during construction destroys the entire house, you need the existing structure to be specifically covered.
Knockdown-rebuild projects involve demolition followed by new construction. The demolition phase carries specific risks including damage to neighbouring properties, underground services (gas, water, electrical) and asbestos removal. Your contract works policy should cover the project from demolition through to completion of the new build.
Builders constructing townhouse complexes, unit developments or apartment buildings require contract works cover appropriate to the scale and value of the development. Larger residential developments may require individually rated policies with specific engineering and design considerations. For developments over a certain threshold, a commercial construction approach may be more appropriate.
Residential builders in Australia need to manage several insurance requirements:
Covers physical damage and liability during construction. Available as single-project or annual turnover policies. Premiums are based on project value or annual turnover.
Mandatory in most states for residential building work above certain thresholds. This protects the homeowner (not the builder) after completion if the builder cannot rectify defects or complete the work. See our comparison guide for how this differs from contract works insurance.
While contract works insurance includes public liability cover for the construction activity, some builders also hold a separate standalone public liability policy for non-construction business activities (site inspections, quoting, office operations).
Mandatory if you employ staff. This is separate from contract works insurance and is regulated by each state's workers compensation authority.
Residential construction projects face risks that are worth discussing with your broker when arranging cover:
The most common approach for active residential builders is an annual turnover contract works policy. This covers all projects commenced during the 12-month policy period, with the premium based on estimated annual turnover. At renewal, the builder declares actual turnover and an adjustment is calculated.
This approach offers several advantages:
For builders just starting out with only one or two projects, single-project policies may be more appropriate until the volume of work justifies an annual policy.
Residential builders typically need contract works insurance (physical damage and liability), home warranty or domestic building insurance (mandatory for residential work), public liability insurance, and workers compensation if employing staff. A specialist broker can advise on the right combination for your business.
Yes, but the existing structure must be specifically declared on the policy with an agreed value. The standard policy only covers new works unless the existing building is noted. This is a critical detail for any renovation or extension project.
Yes. A knockdown-rebuild should be covered from demolition through to completion. The demolition phase carries specific risks including damage to neighbouring properties, underground services and potential asbestos issues.
While not always a legislative requirement, it is effectively mandatory in practice. Standard building contracts require it, lenders require it, and head contractors require subcontractors to have it. Operating without it creates significant uninsured financial exposure.
Contract works covers damage during construction. Home warranty covers the homeowner after completion if the builder cannot complete or rectify defects due to insolvency, death or disappearance. They are separate products — most residential builders need both. Read our full comparison.