July 13, 2009 | | Comments 3

Adequate Cover with your Insurance

“As an Owner Builder does your Insurance policy provide you with adequate cover?”

Owner Builder Insurance in Plain EnglishIt’s a great question and one that you must answer clearly before proceeding with a policy purchase. When it comes to Owner Builder Insurance you need to be very careful because not all policies are the same. You are the Prinicipal Contractor as an Owner Builder and the buck stops with you. Please make sure you do your research and get the right insurance protection.

Insurance Policy documents can, at the best of times, read like gobbledegook. For this reason Simon Pascoe at FDBeck Insurance Brokers has provided a plain English breakdown of the jargon used in policy documents to help make things clearer for you.

Owner Builder Construction Policy in Plain English

Generally speaking, most owner builder construction policies will cover fire, storm, impact, malicious damage, theft and public liability.

A word of warning – what’s included within the fine print of the policy Conditions or Exclusions can make all the difference in the event of a loss. It’s important that you ask the right questions of your insurer.

The following is what all Owner Builders need to look for when purchasing construction insurance.


Whilst it a good idea that sub-contractors have a minimum of $5,000,000 public and products liability insurance and relevant employers liability insurance, some policies make this a Condition of the Owner Builders insurance policy. As an Owner Builder you may not be on site 100% of the time therefore this Condition of the policy may be too much of a burden.

Some policies also have an Exclusion under the Legal Liability section of the policy for any actions or instructions of any Sub-contractors or their employees. This restriction may leave Owner Builders exposed to extreme risk.

Voluntary Workers

Cover for Voluntary Workers can be a grey area due to the Workers Compensation laws varying in each state. You should avoid policies that have a specific Voluntary Workers Exclusion contained within the Legal Liability section.

It is recommend that even if you don’t employ or plan to employ, you should still seek a simple, basic (or casual) workers’ compensation insurance policy. For more information on Workers Comp visit the Owner Builder Insurance webpage on Workers Compensation Insurance.


Unless you have complied with the Australian Standards Fire Precautions standards it’s common for policies to apply a welding exclusion under the Legal Liability section of a policy. However, this should only be excluded under the Legal Liability section of the policy relating to third party damage or injury. It should not be a General Exclusion applying to damage to the contract works covered under the Material Damage section.


Again it’s common for policies to apply a demolition exclusion under the Legal Liability section of a policy. Avoid policies that have a blanket Exclusion applying to all sections of the policy. If you are not careful you may find that you are not covered for damage to existing structures when demolishing internal structures.

Cover for Vibration, Removal or Weakening of Supports

Policies that exclude this cover can leave you vulnerable to very substantial claims, e.g. where vibration or excavation has caused damage to a neighbour’s property. If excavation or underpinning work is done in accordance with approved engineer’s plans, specifications, condition and geotechnical reports then your insurance should cover you. It’s always a good idea to provide your insurer with these reports prior to going on risk.

Removal of Debris

Some policies limit this amount to $10,000 regardless of the size of the contract. If your contract works incurs a major loss well into the construction period the demolition, disposal of damaged or undamaged contract works and the removal of debris can be significant. If it’s a large project $10,000 will not be enough cover. Consider a policy that covers you for 10% of the contract value.

Professional Fees

Again in the event of a large loss; architects, engineers, surveyors and consultants fees will be incurred for the replacement or repair. Be aware of policies that limit this cover to only $10,000 as it may not be enough. There are policies available that provide up to 15% of the contract value.

Existing Structures

Do you need cover for any existing structures that are not part of your project? If you are renovating or extending, your existing domestic house insurance will generally either cease altogether, or in some cases will continue but with some major restrictions. Cover under your Owner Builder policy is not automatic so be sure to check with your insurer.

Escalation Expenses

Avoid policies that don’t have a special provision for escalation allowance. If your project is damaged and you have to rebuild, you may find that the costs have gone up. Look for insurance that allows for 15% of the contract value.

Cover for Vacant Land Prior to Construction

Don’t be afraid to start cover early because most insurers will charge you a premium based on the contract value for a 12 month period. Therefore if you believe your project will be less than 12 months don’t hesitate to start the cover early because in most cases it will not cost you any additional premium and you will have Legal Liability cover for your vacant land.

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  1. What does public liability insurance cover and why do I need it soley in the event that a person may illegally trespass onto my property, hurt themselves and try to sue me when their entry is illegal?
    I am building a deck onto my existing home and am an owner builder.

  2. Hi Catherine,

    Basically Public Liability covers you against claims by third parties for personal injury or property damage. This is not just limited to someone breaking into your property, but it applies to anyone coming on site that suffers injury or damage and a result of your legal liability. Each policy is different so it hard for me to be specific, but there are some restrictions such as injury to yourself, family members living with you, etc.

    If you are building a deck to your existing home then my first recommendation would be to contact your home and contents insurer and ask them if they would note this under your current policy. Many home and contents insurers have an automatic coverage for minor renovations, but cap contract values from anywhere between $10,000 to $100,000. This way you can ensure you have cover without having to pay any additional premium.

    Unfortunately some of the cheaper home and contents policies that exist in the market have no such extension. However if you check with your current insurer and you have scope under your existing policy then there would be no need to arrange a separate liability policy.

    Simon Pascoe at FDBeck Insurance Brokers

  3. Some company’s cover for Material in Transit other don’t.Wouldn’t the company transporting the material have their own insurance?I’m not sure which way to go?

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