Building Standards and Home Insurance: What You Need to Know

Whether you’re rebuilding or renovating a house, you’ll be taking a huge step forward in your home ownership journey.   

Understanding how building standards can impact your Home Insurance is an important part of the building process.    

Home Building Insurance protects your home (including your house, garage and other structures) against loss or damage due to severe weather, fire, vandalism and more.  

So, before you start building or renovating, we’ve put everything you need to know about building standards and Home Insurance into a comprehensive guide.

Home Building Insurance covers the cost to repair or rebuild your damaged or destroyed house, garden shed, fences and other structures on your property. 

According to our Product Disclosure Statement, your Home Building Insurance may also cover items such as:

• Clothes lines 

• Fixed electric vehicle chargers 

• Carports 

• Paths and paving 

• Shade sails or umbrellas 

• Patios or permanent decking

During the application process for Home Building Insurance, you’ll be asked about some characteristics of your home. 

These types of questions may include:

• What type of material are your walls and roof made of? 

• Are you going to renovate or alter your home? 

• Are you going to remove the roof or external walls during the renovation?

• Are you building under your home, raising your home or removing or replacing stumps? 

And remember, if any of these conditions change, such as with renovations, you should also let your insurer know in case your policy needs to be updated.  

Find Out Your Estimated Home and Contents Replacement Costs

Home Building Insurance is a form of protection for property owners in Australia, safeguarding them financially in the event their home is damaged or destroyed and they need to make a claim on their policy.

During a claim, if it appears that the damage was caused by the failure of previous repairs or renovations, we may need to investigate further. In this specific situation, we might ask for evidence that the original work was completed by a qualified professional to required standards.

Following building standards, codes and regulations while building or renovating your home with a qualified tradesperson will help ensure that you avoid some potential risks and liabilities as it is reasonable to assume the work meets Australian standards. 

However, neglecting to follow Australian Building Standards, codes and regulations can lead to significant costs, penalties and may compromise your insurance cover. For instance, if new damage is a direct result of unqualified DIY repairs, your claim may be declined as this could be considered a failure to mitigate your loss.

Underinsurance is when you don’t have enough insurance to cover the total cost (at today's prices) of repairing or rebuilding your home and contents if they’re damaged or destroyed. 

When renovating your home, particularly if doing more than small cosmetic changes, the cost of rebuilding the home can increase significantly. The ‘sum insured’ is the amount that you’re covered for in the event of repairs or rebuilding. It is important to increase your sum insured enough to allow for the total replacement costs of the home (including the cost of the recently completed or planned renovations). Failure to do this could lead to you being underinsured.

It’s important to recognise that building standards can evolve, particularly if your home was built years ago. To ensure your sum insured is adequate to cover current building standards, you can use a replacement value calculator to get an estimate. However, for a more accurate cost estimate of a rebuild, it’s recommended to engage a professional valuer or building contractor.

Building a house without adhering to Australian Building Codes, Standards and Regulations can open you up to significant risk, which could result in defects, structural or design faults.  Any loss, damage or legal liability you incur caused by these may not be covered by your building insurance cover. These can compromise your insurance cover and are likely not covered by your policy as part of the policy’s General Exclusions.

The Australian Building Codes Board (ABCB) is a joint initiative of the Commonwealth, state and territory governments alongside the building and plumbing industries. 

As a writing body, the ABCB is responsible for the National Construction Code, WaterMark and CodeMark Certification Schemes.

The National Construction Code provides a framework for building standards in Australia.[1]

There are multiple standards and specifications including:

• Fire Safety Specifications 

• Building and Design Safety Specifications 

• Energy Efficiency Specifications

As a homeowner, your insurance company will rely on you doing your due diligence to ensure your home is built according to Australian Building Standards around keeping your home maintained and in a good condition.

When assessing your claim, if we find the damage was caused or worsened by a part of your home that wasn't built to the required standards of the time, we will consider a few factors:

1. We assess if the defect was something a homeowner could have been reasonably aware of, such as damage from slow leaks, visible mould, or rust. This helps inform the claim decision.

2. Then, even for an accepted claim, if the damaged area is non-compliant, our builders may not be able to warrant a repair. In this situation, we may settle your claim with a cash payment (where mutually agreed) to reflect the value of the area before the damage occurred.

On top of this, you should review your Home Insurance policy and check that the sum insured is adequate, so you can reduce any further risks related to underinsurance.

Budget Direct will cover rebuilding costs up to the limits stated on your Insurance Certificate and Home Insurance PDS. 

It’s important to ensure that you fulfill any obligations related to building standards to reduce the risk of not being covered. For example:  

• If you fail to comply with any Commonwealth, State, Territory, or local government law, ordinance, regulations, notices, or orders. 

• If you have not done building work to the home that was requested by a relevant authority before the loss or damage occurred.

If your Home Insurance claim is accepted, Budget Direct, where possible, will aim to repair or rebuild your home from our network of builders and suppliers.

When calculating how much it would cost to repair, rebuild, or replace your home, Budget Direct will*:

• Have one of our assessors, builders or other suppliers assess the damage and establish how long it will take to complete the repair or rebuild and a scope of works and cost.

• Review your quote, repair method, labour, and material costs.

*Either one or both of these options will be completed, depending on the circumstances. 

To figure out the cost of rebuilding your home, make sure you take note of: 

• Any improvements made to the home can add to the cost of rebuilding

• Any additional costs related to rebuilding, such as site works and access restrictions.  

Any assessment we do will consider current industry costs, internal and external cost databases and any applicable additional benefits available to you.

After assessing the loss or damage our builders/assessors will determine the cost of the work required and detail this which is called a 'scope of works'.

Once your claim is approved, we will either repair or rebuild your home to the same standard, specification, or quality, or we will settle it with a cash payment (where mutually agreed). The repair or rebuild option is conditional on the work being completable within your building's sum insured.

As part of your Home Building Insurance policy, we can also cover the removal of debris and extra rebuilding costs for up to 10% of the amount your home is insured for (building sum insured). 

When repairing damage or rebuilding your home, Budget Direct policies include additional benefits that may cover some of the costs of extra rebuilding costs such as:

• Hire the services of an architect, surveyor or engineer (when needed).  

• Apply for building permits and approvals for repairing or rebuilding the home.

Whether you’re building, renovating or rebuilding your home, there are a lot of things you’ll need to consider. 

Some of the things you’ll need to consider include:

• Cost - How much will you need to build, renovate or rebuild your home? 

• Australian Building Standards - What building standards do you need to follow to ensure that your home is compliant? Have I organised a suitably qualified tradesperson to conduct the works?

• Home Insurance - How much will I need to be insured to cover rebuilding your home, and how will this affect your budget? 

• Rebuilding - How do I ensure that my home has structural integrity, is energy efficient and safe?

Before starting any large renovations (such as extensions or wall insulation) you should research how much it might cost. 

You can also create a basic scope of work to figure out everything that needs to be done during the building process. 

This will help when it comes time to create a realistic budget that includes the cost of materials, layouts and tradespeople. 

Check with your insurer to make sure you will still continue to be covered during the building works or renovations. Exclusions and limitations may apply to your policy based on the expected costs or type of construction being undertaken. For example, if the renovations will exceed $50,000, Budget Direct will not cover you for legal liability.

An essential part of any building process will be working with a licensed builder. Even if you’re choosing to manage the project, input and repairs from a licensed builder will ensure that all of the work on your home complies with Australian Building Standards, codes and regulations.

If you have a Home Insurance claim, keep in mind that your insurer may not be able to repair or rebuild your home if there is pre-existing damage, maintenance issues or building defects. 

Depending on your insurer’s acceptance and eligibility criteria they may not even be able to offer you insurance cover based on the type of construction works being undertaken.

Before you sign a contract, make sure you check the contract for:

1. Your name and the name and licence number of your builder 

2. A description of the contracted work 

3. The contract price/estimate 

4. The estimated completion date 

5. Building plans and specifications 

6. Cooling-off rights, including how and when you can withdraw from the contract.  

7. A date and signature from you (or someone on your behalf) and your builder. 

In the event of a claim, you should also check with your insurer prior to signing and completing any repairs with your trade to ensure you’re covered should there be any potential risks or losses. Your insurer has the right to inspect damages prior to repair and failure to do this could result in a claim not being accepted.