QLD: Q&A Compulsory Construction Works Insurance Premium

This article about the compulsory construction works insurance premium has been provided by Tyrone Shandiman, Strata Insurance Solutions.

Question: Is the Queensland Government’s compulsory construction works insurance premium fair, or is this a revenue grab?

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Is the Queensland Government’s compulsory construction works insurance premium fair, or is this a revenue grab?

A Queensland body corporate of 16 units in multi dwelling residential 50 years old building obtained a quote for maintenance work on common property roof. The value of proposed maintenance works was about $8,600. QBCC charged about $3,400 insurance premium for a compulsory Queensland Home Warranty Scheme.

This warranty would apply for 6 months after work completion and the work is scheduled to start in 3 months time, but the premium had to be paid before the work can be scheduled. It is reasonably unlikely that any of the 16 residential units will be affected by the proposed common property roof maintenance works.

By comparison the body corporate must have under another BCCM Government’s requirement a total building reconstruction insurance in case of the building destruction. The premium for that reconstruction valued at $5,000.000 is paid and is under $7,000 and is valid for 12 months.

Why is the Queensland Government imposing such unfair, forced QBCC compulsory Queensland Home Warranty Scheme insurance premiums?

What does the Queensland Government plan to do to eliminate the unfair provisions?

Answer: The cover provided under Home Warranty insurance is not covered under a strata insurance policy so both covers are required.

In Queensland, it is a requirement that Home Warranty insurance is taken out on works exceeding $3,300. There are no provisions to opt out of this.

The policy may provide cover where:

• a licensed contractor does not complete the contracted residential construction work and you have terminated the contract
• the contractor fails to rectify defective work
• the building suffers from subsidence or settlement.

There are a few corrections to the questioners statements:

• The premium for a building alteration valued at $8,000-$9,000 is in the vicinity of $250 and not $3,400 Source: Queensland Building and Construction Commission: Insurance premium fees.
• Home warranty insurance provides cover for a period of 6 years & 6 months Scource: Queensland Building and Construction Commission: Home warranty insurance explained.

It should also be noted that the cover provided under Home Warranty insurance is not covered under a strata insurance policy so both covers are required.

More information on Home Warranty insurance can be found on the Queensland Building and Construction Commission website.

Tyrone Shandiman
Strata Insurance Solutions
T: 07 3899 5129
E: tshandiman@iaa.net.au

See this relevant Q&A about approval for spending limits: Question: Our new Chairperson has raised the question on contract work of less than $3300 requiring a formal quote and contract. What are our spending limits?

This post appears in Strata News #406.

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisernet Australia AFSL No 240549, ABN 15 003 886 687.

If you have a question about home warranty insurance for volunteer workers or something to add to the article, leave a comment below.

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