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What Is HBCF And Why Is It Mandatory For All Builds Over $20K?

 When embarking on a new build, renovation, or extension project, one of the most important — yet often misunderstood — aspects is Home Building Compensation Fund (HBCF) insurance. For homeowners and builders alike, understanding what HBCF is and why it’s compulsory for most residential projects over $20,000 can save time, stress — and potentially thousands of dollars.

At Auswide Insurance Brokers, we often get asked: “Do I really need this insurance?” The short answer is yes — and there’s a very good reason why it’s mandatory.

What Is HBCF?

The Home Building Compensation Fund (HBCF) is a government-mandated insurance scheme in New South Wales designed to protect homeowners when building work doesn’t go as planned. It provides a financial safety net if your builder or contractor can’t complete or fix work they’ve been contracted to do — particularly in situations where the builder:

  • Becomes insolvent (goes bankrupt),

  • Dies or disappears,

  • Has their licence suspended due to failure to meet a court or tribunal order in your favour. 

Think of HBCF as last-resort protection. It doesn’t replace your builder’s obligations under contract or statutory warranties, but it steps in when those obligations can’t be met due to serious events affecting the builder. 



Why Is HBCF Mandatory for Builds Over $20,000?

Under NSW law, any residential building project valued at over $20,000 (including GST) must be covered by HBCF insurance — before any money is paid or work begins. This applies to:

  • New homes and apartments up to 3 storeys

  • Renovations, extensions and additions

  • Swimming pools, garages, outbuildings and other residential structures 

Failing to arrange this cover isn’t just risky — it’s illegal. Licensed builders must provide the homeowner with a Certificate of Insurance before starting work or accepting a deposit. 

This isn’t just paperwork. The certificate legally signals that your project is protected under the HBCF scheme.

What Does HBCF Actually Cover?

HBCF provides financial protection in scenarios where major issues occur because your builder can no longer meet their contractual obligations. Coverage typically includes:

  • Failure to commence work (loss of deposit),

  • Failure to complete work (partial or full),

  • Major defects that occur within up to six years of completing the work,

  • Non-major defects for up to two years after completion. 

It’s important to note this insurance doesn’t cover every type of dispute or defect automatically — you usually need a trigger event (like insolvency or licence suspension) before a claim can be made. 



Who Pays for HBCF?

Legally, the builder or contractor must obtain the HBCF cover. In practice, the cost of insurance is typically included in the contract price and passed on to the homeowner as part of the overall project cost. This means it’s your builder’s responsibility to arrange the insurance — but it’s in your financial interest to ensure it’s been done correctly before paying any deposit. 

As insurance brokers, we at Auswide Insurance Brokers can guide both builders and homeowners through the process of arranging the right HBCF cover and answering all the questions around eligibility, timing, and compliance.

Protect Your Build — and Your Peace of Mind

Whether you’re building your dream home or planning a large renovation, compulsory HBCF insurance is a safeguard that protects your investment and mitigates risk.

Ensuring your project has the right cover in place isn’t just a legal requirement — it’s smart planning.

If you’re unsure about HBCF requirements or need help arranging compliant insurance for your next project, get in touch with Auswide Insurance Brokers — we’re here to help every step of the way.
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