Building Indemnity Insurance

In South Australia, the builder must ensure that a BII policy is in place before carrying out any domestic building work covered by the Building Work Contractors Act 1995 (BWC Act). Builders must ensure that that construction does not start until both the homeowner and the local council have received a copy of the insurance certificate.

When do you need BII?

A builder must obtain BII if they are contracted to carry out work:

• valued at $12,000 or more; and  
• that work requires council approval. 

For contracts signed on or after 10 November 2025, the threshold amount will increase from $12,000 to $20,000 (as prescribed in the Building Work Contractors Regulations 2011). 

Explore our step-by-step guide to learn exactly which residential building works require BII.

What does BII cover? 

The BII policy is taken out for the benefit of current and future homeowners. It covers the homeowner for: 

• loss of deposit; 
• non-completion of building work; 
• defective workmanship for a period of five years after practical completion; and  
• the risk of being unable to enforce or recover under the statutory warranties.

AND the builder has: 

• died; 
• disappeared; or 
• become insolvent.

Building indemnity insurance “runs” with the property, meaning that subsequent owners and purchasers of a property can claim on the policy during the period of the cover even if they did not originally contract for the works.

What are statutory warranties?

The BWC Act implies certain statutory warranties into every contract for domestic building work of a value equal to or greater than $12,000, including:

• the work will be performed in a proper manner to accepted trade standards and in accordance with the plans and specifications agreed. 
• all materials to be supplied will be good and proper. 
• the work to be performed will comply with all statutory requirements. 
• if the contract does not stipulate a period within which the work must completed, the work will be performed with reasonable diligence. 
• if the work consists of the construction of a house, the house will be reasonably fit for human habitation. 
• if your client has expressly communicated to you (or your employee or agent) the purpose of the work or the outcome they expect, showing that they are relying on your skill and judgment, the work and any materials used must be reasonably fit for that purpose or capable of achieving the desired result. 

How long does the insurance last?

After completion of building work, the homeowner has five years to commence legal proceedings against an alleged breach of the statutory warranties and five years to notify the insurer of a claim on the policy of indemnity insurance.

How much can homeowners claim?

The policy claim limit depends on the insurer and the date the policy is issued. 

• For policies issued before 1 October 2025, the maximum claim is $150,000. 
• For policies issued by QBE on or after 1 October 2025, the maximum claim increases to $250,000. 
• For policies issued by other insurers, the claim limit remains at $150,000 until 10 November 2025, after which it will increase to $250,000. 

What type of work does not require BII?

Some building work is exempt from the requirement to take out BII. This includes: 

• construction of multi-storey residential buildings over three storeys that also contain two or more separate dwellings.  A storey does not include a mezzanine or a space within a building if it is intended that the space contain only a lift shaft, stairway, meter room, laundry, bathroom, shower room, water closet, car park or combination of any of the above. 
• work by owner-builders. However, BII is required for licenced building contractors who undertake building work for an owner-builder that exceeds the prescribed monetary threshold.  
• Non-residential (commercial) building work.  

Splitting contracts to avoid the requirement for insurance is prohibited and can lead to heavy penalties.

Prefabricated and modular homes

Modern Methods of Construction (MMC) include prefabricated and modular building methods. These are largely carried out off-site in a factory setting. MMC is gaining popularity due to its efficiency. However, a component of on-site work is often still required.

To determine whether council approval is required and any requirements for BII, it is essential to determine whether the building is intended to be habitable and permanently fixed to the site. In most cases, works associated with MMC homes will involve securing the structure, connecting services and often finishing works. Where permanent connections are involved, the home will require council approval. This will likely trigger the need for BII.

However, if the transportable home is registered as a caravan, meaning it is for temporary use and not permanently fixed to the site, then BII is not required. 

If you are unsure whether your project requires council approval, contact HIA’s Building Services team or your local council for confirmation.

Who arranges BII?

Only a licensed building work contractor can obtain the certificate of insurance and pay the premium to the relevant insurer. However it should be noted that the building work contractor is paying the premium on behalf of the homeowner. This means that the building contractor is entitled to recover this amount from the homeowner (as part of the contract price). Once the premium has been paid, the builder may seek recovery of this amount from the homeowner as a separate payment (separate to the deposit).

If you require assistance with obtaining or reviewing your BII, please contact HIA Insurance Services on 1800 762 878.