The builder must take out Home Warranty Insurance (building insurance) for any developments over $12,000. If they are unable to take out the home owner’s warranty insurance policy, it may be he is unlicensed, unprofitable or has had previous claims made against him. This insurance covers the homeowner if the builder dies, goes broke, retires or will not fix faulty work. The insurance company will pay out the owner and pursue the builder. If you take out the policy as an owner builder, you forfeit all rights to claim against the builder.
Homeowners should also expect their builder to be covered by contract works and public liability insurance. Contract works insurance covers all new materials that are delivered to the site as well as covering all new work against theft, vandalism, fire and any other damage. Public liability covers anyone who enters the site and hurts themselves. Usually, local councils require cover for up to $10,000,000. Insurance policies need to be checked thoroughly to ensure that full protection is provided in relation to the building works.
Check if your current home insurance policy covers your existing residence during construction. This covers your existing home against damage not caused by the builder or has anything to do with the new works being done e.g., an electrical fault or water damage. Also ensure that your current home contents policy covers your contents against theft or damage while renovating. Some do not and you may need to take out a separate policy to cover your contents during renovations.