What's the deal with Home Warranty?

What on Earth is HBCF?...

HBCF commonly known as Home Warranty Insurance, is a compulsory insurance that each and every builder must obtain for projects over $20,000. Every builder must apply for eligibility for HBCF based on criteria including experience, company structure, assets and more.

The better a builder ranks against this criteria determines how much coverage they get, as well as how much of a discount (or loading) a builder gets off or added to their premiums, which is then passed onto you, the customer.

Ultimately, the client pays for the policy, so the more stable the builder is, the greater the discount they and the client receive. The premium can be as much as 1% of the contract value for new homes and 2% for multi-dwelling developments, meaning a 10% discount could save hundreds of dollars.

A builder with a discount should be proud to disclose where they sit with home warranty.

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HBCF is designed to protect the consumer in the event that the builder passes away, goes bankrupt or goes missing. It will pay 20% of the contract value up to $340,000.

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What’s the point if it only pays 20%?

We get this question a lot and it’s a good one. If you have signed a BC4 Master Builder’s contract (or any other contract for that matter), the contract should state progress payments to be made. Each of those payments will have a description for the stage of the build, for example- SLAB (Preliminaries, Excavation, Footings, Slab, Internal Drainage). Once that stage is 95% completed, the claim can be made.

DO NOT pay the builder any money unless they have a HBCF policy and once you do start paying, only pay if that stage is at 95% complete. If you only pay the claims at the stage your build is at, then at no time should you be more than 20% of the contract behind. If you are, then your builder has broken the law!!!

If in doubt, seek help from legal experts.

You have the right to have the progress schedule checked by a solicitor before signing or paying anything. In fact, banks have guidelines that they work to for structuring payment schedules. Reputable builders stick to these guidelines. It is important that you choose the correct builder and know which questions to ask to ensure you have a reputable builder. Unsure of the right questions? Here are a few for you to remember:

1.       Do you have enough Home Warranty cover?

2.       What discount do you get?

3.       What will the premium be?

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It’s your policy, you have the right to know.

Even though this insurance is in place, in the event something happens, it could be months before the claim is processed and, in many cases, you may not be compensated for costs such as rent or storage for example. Choose your builder wisely.

The scheme is losing millions of dollars each year so premiums are continually rising. The Master Builders Association and the Government are working together to try to improve the system, but in the meantime, we will see premiums continue to rise.

Unfortunately, and we hate to say it, premiums are rising because of builders who are doing the wrong thing. They are making it hard and costly for the rest who are doing the right thing, builders and people looking to build alike.

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Do your homework.

We cannot stress this enough, research your builder of choice. Here are some examples of how you can best do this:

·        Checkout their license on the Department of Fair-Trading website.

·        Make sure the Directors of the company are running the company and can be found if required.

·        Investigate who holds the license and find out how they obtained it.

·        Find out their HBCF status.

Need more info on HBCF?

For more information and to keep up to date on HBCF changes, visit icare