Domestic Building Insurance Requirements
When insurance is required, what it covers, and how to obtain it for owner-builder works in Victoria
What is Domestic Building Insurance?
Domestic Building Insurance (DBI), also known as "builder's warranty insurance" or "home warranty insurance," is a mandatory form of insurance that protects purchasers of owner-built homes against the risk of defects arising after the sale where the owner-builder is unable to rectify them because they have died, disappeared, or become insolvent.
Under s137B(2)(c) of the Building Act 1993 (Vic), an owner-builder vendor must obtain DBI and provide a certificate of that insurance to the purchaser before entering into a contract of sale, where the cost of the domestic building work carried out on the building exceeds the prescribed amount of $16,000.
Purpose of DBI: The insurance is designed to protect purchasers from circumstances where the owner-builder dies, becomes insolvent, or cannot be located after a defect arises. It provides a safety net ensuring that the cost of rectifying defects is covered even where the vendor is unavailable.
The $16,000 Threshold
DBI is required where the cost of domestic building work carried out on the building exceeds $16,000. This threshold includes both the cost of materials and the cost of labour.
Aggregation of Works
The $16,000 threshold applies to the total cost of all domestic building work carried out on the building. It cannot be avoided by splitting works into separate contracts or stages. If the combined value of all owner-builder works exceeds $16,000, insurance is required.
Works cost exceeds $16,000 (materials + labour combined)
Works cost is $16,000 or less — but defects report still required
What DBI Covers
Domestic Building Insurance provides coverage of up to $300,000 for both structural and non-structural defects. However, the period of coverage varies significantly depending on the nature of the defect:
| Defect Type | Coverage Period | Maximum Coverage | Trigger Date |
|---|---|---|---|
| Structural Defects | 6 years | $300,000 | From completion of work or termination of building contract (whichever is earlier) |
| Non-Structural Defects | 2 years | $300,000 | From completion of work or termination of building contract (whichever is earlier) |
When does DBI pay out? DBI is a "last resort" insurance — it only pays out where the owner-builder is unable to rectify the defect because they have died, become insolvent, or cannot be located. It does not cover defects that the owner-builder is able and willing to rectify.
How to Obtain DBI
Domestic Building Insurance for owner-builders must be obtained from an approved insurer. The key steps are:
Obtain the Defects Report First
Before applying for DBI, the owner-builder must obtain a defects inspection report from a prescribed building practitioner. Most insurers require this report as part of the insurance application.
Apply to an Approved Insurer
The owner-builder must apply to an insurer approved by the Victorian Building Authority. The approved insurer for owner-builder DBI in Victoria is currently Builders Warranty Insurance (BWI) through the Victorian Managed Insurance Authority (VMIA) and private insurers approved under the Building Act.
Provide Accurate Cost Information
The application must accurately state the cost of all domestic building work carried out on the property. Underestimating the cost to avoid the insurance requirement is a serious risk — it may result in the insurance being void or the contract being voidable.
Obtain Certificate Before Contract
The certificate of DBI must be obtained before the contract of sale is entered into. It cannot be obtained retrospectively. The certificate must be provided to the purchaser as part of the Section 32 Vendor Statement.
Successor in Title Protection
One of the most significant aspects of the DBI regime is that the protection it provides extends beyond the immediate purchaser. Section 137C(2) of the Building Act 1993 provides that any person who is a successor in title to the purchaser may take proceedings for a breach of the implied warranties as if that person were a party to the original contract.
This means that if the property is subsequently sold, the new owner retains the benefit of the warranties and the insurance coverage (for the remaining coverage period). This is a significant protection for subsequent purchasers and underscores the importance of the DBI regime.
On This Page
Key Figures
Last Resort Insurance
DBI only pays out where the owner-builder has died, become insolvent, or cannot be located. It does not cover defects that the owner-builder is able and willing to rectify.