Domestic building insurance (DBI)
Mandatory insurance for most residential building work over a threshold value, covering the homeowner if the builder dies, disappears, or becomes insolvent. Capped and run state by state.
Definition
Mandatory insurance for most residential building work over a threshold value, also called home warranty insurance, that covers the homeowner if the builder dies, disappears, or becomes insolvent. It is run state by state (VMIA in Victoria, HBCF in NSW, QBCC in Queensland, and equivalents elsewhere), and the cover is capped and often well below the contract value, so it is a backstop rather than full protection.
Why it matters
Domestic building insurance is the main statutory protection an owner has if a builder fails, and it is more limited than most owners assume. The cover is capped per dwelling, the caps are usually well below the contract value of a modern build, deposits paid before work starts are often excluded, and claims typically cannot be lodged until weeks after the insolvency event. It is a genuine backstop, but it is slow, capped, and partial. Knowing what it does and does not cover is part of managing the risk of a build.
How it works in practice
The builder must hold cover for the job before taking a deposit or starting work above the threshold value. The builder pays the premium and the cover applies to that specific job.
If the builder dies, disappears, or becomes insolvent, the owner can claim against the scheme up to the state cap, for completion of incomplete work or rectification of defects. The schemes are administered state by state, with different caps and conditions in each.
Cover usually activates only after construction has started, and a waiting period commonly applies after the insolvency event before a claim can be lodged. The claim process typically takes months.
Common misconceptions
It covers the full contract value
It doesn't. Each state caps the cover per dwelling, and the caps are usually well below the value of a modern residential build.
My deposit is always covered
Often it isn't. Deposits paid before construction has commenced are commonly excluded. Check your state's specific terms.
A claim pays out quickly
It usually doesn't. A waiting period applies after the insolvency event, and the assessment process commonly takes months.
This entry provides general information only and is not insurance or legal advice. Cover, caps, and conditions vary by state and change over time. Verify current terms with your state scheme or insurer when you need them.