✅ Updated January 2026

Builders and carpenters face some of the most complex insurance requirements of any trade — from mandatory home warranty insurance on new builds through to contract works, public liability and personal income protection. Getting it right protects your licence, your business and your income.

📋 In This Article

  1. →What's legally required
  2. →Public liability
  3. →Contract works insurance
  4. →Home warranty insurance
  5. →Income protection
  6. →Total costs

Legal Insurance Requirements for Builders

Building has some of the strictest insurance requirements of any trade:

  • Home warranty insurance (domestic building insurance) is compulsory in VIC, NSW, QLD, SA and WA for residential building work over certain thresholds
  • Public liability is required for most building licences and all commercial contracts
  • Workers compensation is mandatory if you employ anyone
  • Contract works insurance is required by most principal contractors and financiers

Public Liability Insurance

Building work carries high liability risk — structural failure, fire, water ingress, falls on-site. Public liability at $10–20M is standard.

Cover LevelBest ForTypical Annual Cost
$5 millionSmall carpentry and fit-out only$800 – $1,300/year
$10 millionMost builders and licensed carpenters$1,200 – $2,000/year
$20 millionCommercial builders, head contractors$1,800 – $3,000+/year

Contract Works Insurance

Contract works (also called construction all-risk or CAR insurance) covers damage to the works under construction — storm damage to a partially built frame, theft of materials, accidental damage on-site. It also covers your liability as a contractor on that specific project.

  • Per-project or annual policy: Annual policies suit builders doing multiple projects; per-project for one-offs
  • Who pays: The contract usually specifies who holds the policy — read your contracts carefully
  • Annual cost: Typically 0.5–1% of the contract value

Home Warranty Insurance (Domestic Building Insurance)

If you do residential building work above the threshold in your state, you are legally required to take out home warranty insurance on behalf of the client before taking a deposit. This protects homeowners if you die, become insolvent or disappear before completing the work.

StateThresholdProviderPremium (approx)
NSWOver $20,000HBCF (icare)0.5–1.5% of contract value
VICOver $16,000Domestic Building Insurance (DBI)0.4–1.3% of contract value
QLDOver $3,300QBCC Home Warranty0.7–2% of contract value
WAOver $20,000Building Indemnity Insurance0.5–1.5% of contract value
SAOver $12,000Building Indemnity Insurance0.6–1.8% of contract value
This cost is typically passed on to the client as a contract disbursement and is noted in the contract.

Income Protection for Builders

Construction has one of the highest workplace injury rates of any industry. Income protection is arguably more important for builders than most other trades.

  • Waiting period: 30 days is recommended given injury risk
  • Benefit period: To age 65 if you can afford the premium; 5-year benefit is the budget option
  • Own occupation definition: Essential — "any occupation" definitions are inadequate for tradies
  • Exclusions: Check for pre-existing back/knee conditions, which are commonly excluded or loaded for building workers

Total Insurance Costs for Builders

Insurance TypeTypical Annual CostRequired?
Public liability ($10M)$1,200 – $2,000Yes
Contract works (annual, ~$500k turnover)$2,500 – $5,000Required by contracts
Home warranty insurancePer project (0.5–2% of value)Legally required (residential)
Income protection$2,000 – $5,000Strongly recommended
Tools insurance ($15k cover)$350 – $600Recommended
Workers comp (if employees)Varies by wagesLegally required
⚠️ General Information Only: Insurance requirements vary by state, licence type and contract. Always speak to a licensed insurance broker before purchasing cover. See our full tradie insurance guide for more.