When you're about to sign a building contract, insurance can feel like fine print. But getting it wrong can leave you financially exposed. The right cover protects you if things go wrong during your project - from a builder going bust, to storm damage mid-construction, to accidents on site.
To help clarify what to look for, we spoke with Jordan Galloway, Director of Galmar Group. Jordan has seen too many cases where clients didn't ask the right questions, and he believes that educating homeowners is one of the best ways to lift standards in the industry.
Here are the 4 essential insurances to check before signing your contract.
1. Home Building Compensation Fund (HBCF) Insurance
In NSW, HBCF insurance is mandatory for all residential projects valued over $20,000, and it must be in place before you pay your deposit or sign the contract. If a builder ever suggests paying the deposit first and 'sorting the insurance later', Jordan says that's a serious red flag - the certificate should always come first.
"This is the bare minimum insurance every project needs", he explains. "It's essential for all residential work, and the value of the policy must match or exceed your total contract. If a builder tries to split your project into smaller stages with multiple HBCF certificates, it's a sign they're not approved for a job of that size."
The policy protects you if the builder dies, disappears, becomes insolvent, or has their licence suspended, covering losses such as deposits, the cost to complete the build, and rectification of major defects. Without it, homeowners are "completely exposed", Jordan says - left without cover for unfinished or defective work if the builder collapses mid-project.
Ask your builder for an HBCF certificate in your name showing the property address, contract price, and period of insurance, and verify it using the official HBC Check Portal before handing over any money.
2. Contract Works Insurance
Also known as construction all-risk insurance, contract works insurance covers the building works while they're in progress. It protects against damage caused by fire, theft, storm, vandalism, or accidental destruction during construction.
Unlike HBCF insurance, Contract Works insurance is not mandated by law in NSW. However, it is widely considered best practice for residential building projects. This cover should be in place before any physical works begin on site
Jordan says it's an easy one to overlook, but doing so can be costly. "We all know how unpredictable building can be", he says. "When structures are exposed to the weather for long periods, having this insurance gives peace of mind that your home and your investment are protected if something unexpected happens."
In most NSW residential building contracts, the builder is responsible for arranging Contract Works insurance, with the cost typically built into the contract price - but this should always be confirmed in your signed agreement. Some builders take out project-specific policies, while others hold broader annual or bundled insurance policies where Contract Works cover sits alongside other cover such as public liability. In either case, you should request confirmation that appropriate cover is in place before works commence.
If you are renovating, Contract Works insurance generally covers only the new works under construction. Your existing home is usually insured under your own home policy, which may restrict or vary cover once renovations begin. Before construction starts, notify your insurer and confirm what remains covered during the build.
For knockdown-rebuild projects, your existing home insurance policy will typically no longer be suitable once demolition begins. Rather than cancelling your policy outright, notify your insurer in advance and clarify how cover will transition during demolition and construction. The key is ensuring there is no gap between your original policy ending and the builder's cover taking effect.
Without proper coordination between the builder's insurance and your own policy, damage during construction could leave you financially exposed. Taking the time to confirm responsibility and cover before works begin can prevent serious issues later.
3. Public Liability Insurance
Public liability insurance covers accidents or damage caused by building work, protecting both the builder and homeowner if someone is injured or property is damaged.
"Building sites can be dangerous places", Jordan says. "This cover ensures everyone in and around the site is financially protected if the worst happens. In some councils and DAs, it's not optional - it's a minimum legal requirement before a builder can start work."
Without this policy, you as the homeowner could be held personally responsible for injury or damage that occurs on site - something Jordan warns can easily spiral into tens or hundreds of thousands of dollars in claims.
Ask your builder for a certificate of currency showing the insurer, policy number, and expiry date. Common insurers for public liability in Australia include Allianz, QBE, CGU, Zurich, and NRMA.
4. Workers' Compensation Insurance
If the builder employs staff, workers' compensation insurance is required by law. It covers medical expenses, lost wages, and rehabilitation if a worker is injured on site.
Jordan calls it a fundamental protection - not just for legal compliance, but for ethics. "As trades, we make our living with our hands", he says. "If we can't be on site, we can't earn. Every worker deserves to feel safe and financially secure if something goes wrong. Any builder who doesn't have this cover isn't protecting their team - and that should make you question how much care they're putting into your project."
Homeowners should ask for a certificate of currency issued by the builder's insurer or icare, the NSW workers' compensation authority. Without it, if a worker is injured, the homeowner could face liability claims.
Final thoughts
Insurance may feel like a formality, but it's your safety net if things go wrong. Before you hand over a cent, make sure your builder can show current, valid documentation for all 4 types of cover.