Domestic Building Insurance (DBI) is a mandatory safeguard in Victoria for residential construction projects valued over $16,000, protecting homeowners and future buyers from risks like builder insolvency or defects. It holds particular importance for builders, who must obtain it, and owner-builders, who face unique obligations to secure their own coverage.
For Builders
Builders in Victoria are legally required to arrange DBI before accepting deposits or starting work on domestic projects exceeding $16,000, such as home builds, renovations, or additions like decks and pools. This insurance, often provided through the Victorian Managed Insurance Authority (VMIA) or approved commercial insurers, covers homeowners for non-completion, structural defects, or non-structural issues if the builder dies, disappears, goes insolvent, or fails to fix tribunal-ordered problems
Failure to provide a policy copy and certificate of currency upfront can lead to fines or registration issues with the Victorian Building Authority (VBA). It shifts risk from the client to the insurer, ensuring builders maintain eligibility via underwriting checks on their track record.
For Owner-Builders
Owner-builders managing their own projects over $16,000 must purchase separate DBI to protect future buyers, as they don’t qualify for a builder’s standard policy. This often requires a professional defects report from services like building inspections before approval, covering similar risks but with limitations like exclusions for visible defects known at sale,
Without it, selling the property becomes difficult, as banks and buyers demand proof of coverage for compliance under the Building Act 1993 and Domestic Building Contracts Act. It boosts marketability by assuring buyers of defect rectification up to policy limits.
Key Coverage Details
DBI typically includes:
Non-completion if the builder can’t finish.
Structural defects (e.g., foundation failures).
Non-structural defects (e.g., water leaks) within policy periods, often 2-6 years.
Exclusions apply to consequential losses like rent or property devaluation. Premiums are paid by the builder or owner-builder, with claims handled via forms from providers like VMIA.
Practical Steps
Verify builder eligibility and insurance details via VBA or VMIA’s BuildVic portal before paying deposits. Owner-builders: Get a pre-sale inspection and apply early to avoid delays. Always retain certificates, as they’re essential for claims or sales.