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Residential Builders’ Warranty Insurance For Licensed Builders
Why do licensed builders require residential builders warranty insurance?
State Legislation requires that Licensed Builders must provide Residential Builders’ Warranty Insurance to their clients for all residential contracts in excess of $12,000.
Who does residential builders’ warranty insurance cover?
Residential Builders’ Warranty Insurance protects the person on whose behalf work is to be done and the subsequent homeowners.
Policy Coverage
The Residential Builders’ Warranty Policy covers loss or damage resulting from non-completion of the work, loss of deposit or breach of statutory warranty if you cannot recover compensation from the builder because of the following situations:
- Death of the Builder
- Disappearance of the Builder
- Insolvency of the Builder
How much is covered?
The Western Australian statutory limitations is set at $100,000 in total in the aggregate for all claims under this policy for each home (including legal costs).
What is the excess?
The excess is $500 (five hundred dollars) for each claim made relating to each dwelling in the building insured under the policy.
How long are you covered?
The policy covers claims in respect of work made within 6 years after the completion of the work.
How long do you have to claim?
You must notify JLT BISWA of a claim for loss or damage resulting from all causes (other than incomplete work) within a reasonable time of when you first became aware, or when you ought reasonably have become aware, of the fact or circumstance giving rise to the claim.
How do I apply for a QBE Residential Builders’ Warranty Policy?
Please download and complete the Eligibility Application Form available on this website in full; please refer to the Builder Checklist which is a reference guide for all Builders. Then submit your application form to JLT BISWA (refer to the contact link on this website).
Underwriting Guidelines
The “standard approach” to underwriting Residential Builders’ Warranty Insurance incorporates a holistic approach which takes into account all of the following listed individual areas.
BUILDERS LICENCE CHECKS
- The Licence number and trading name is checked with the relevant State Authority.
- Past claims history is checked against the Licence number.
- The Licence is checked for any restrictions and to confirm that the builder has the necessary authorisation to undertake specific building works.
- The Approved Contractors / Builders Licence needs to match the trading name, state and category of builder in all cases.
PERSONAL & BUSINESS BACKGROUND INFORMATION
- Due to the nature of the insurance product the insurer takes into account previous liquidations, bankruptcy, receiverships and scheme of arrangements.
Negative background informational checks can be detrimental to the application.
ACCEPTABLE TECHNICAL QUALIFICATIONS
- External trade qualifications (inclusive of apprenticeships, TAFE, University, Licence accreditation points) and internal company experience and training.
- Membership of Associations and Industry Bodies and the relevant training and education undertaken.
- Technical qualifications are highly regarded especially in the areas of business management, accounting, estimating and building management.
TRADE REFERENCES
- Trade References from building material suppliers to confirm credit payment history.
A negative reference will be thoroughly investigated.
EXTERNAL AGENCIES
- Bankruptcy / Insolvency checks will be undertaken via external credit reporting agencies.
- Company details and Australian Business Number etc will be checked against public records viz: ASIC and Australian Business Number registers.
- Confirmation of credit payment history with external agencies and internal divisions.
A negative reference will be thoroughly investigated.
PREVIOUS INSURERS COVERAGE
All new business applicants will sign an Authority and Consent which will allow JLT BISWA and/or QBE to contact the applicant’s current Builders’ Warranty provider or previous insurers or Government Agencies in need. The type of information that may be requested will include:
- Current eligibility status;
- Level of insurance coverage provided to the builder;
- Confirmation of issued certificates of insurance for unfinished projects; and
- The current status of any outstanding claims and/or previous claims experience.
PREVIOUS INDUSTRY/ CONSTRUCTION EXPERIENCE
- For the purposes of analysing insured turnover requirements and the construction requirements of the builder, previous industry experience, construction / contract experience and the available capacity of the builders will be assessed.
- The length of time the business entity has been trading which is compared to industry averages.
- If the turnover aspirations of the business are not reflected in previous experience and capacity then this will adversely affect the application.
THE TYPE OF CONSTRUCTION
- The construction risk associated with specialised projects, standard jobs and overall insured turnover will be separately assessed.
- The complexity and size of an individual project can impact greatly on the underwriting assessment time.
THE LEVEL OF INSURED TURNOVER REQUESTED
The level of insured turnover is also rated against the financial strength of the business, the directors and partners.
FINANCIAL ANALYSIS
The level of financial assessment undertaken is dependant on the builders insured turnover requirements. The assessment process may or may not include the following:
- Capitalisation of the business
- Net turnover growth
- Gross & Net profit margins
- Interest cover (x)
- Work in progress reports
- Debtor collection days
- Creditor payment days
- Working capital position
- Return on equity
- Return on assets
- Cash flow projections against actuals
- Statement of Assets & Liabilities of the Directors / Sole Trader / Partners
- Trust deeds
The greater the complexity of the financials and the structure of the group the greater the underwriting time required to assess the application.
The above guidelines are a minimum indication on how QBE approaches underwriting Residential Builders’ Warranty Insurance Products. Each and every application will be assessed on its merits and QBE will take into account all of the individual circumstances presented together with any additional information that may be warranted given the perceived complexity of the application.