Public liability and construction insurance requirements for Australian builders

Australian builders may be required to hold five main types of cover: public liability, contract works, home warranty or its state equivalent, professional indemnity and workers compensation.

Published minimums include $10 million of public liability for some Victorian registration classes, $5 million for a licensed Tasmanian builder, $1.5 million of professional indemnity in Victoria, and project cover triggered by a contract value as low as $3,300 in Queensland.

No single policy is required of every builder in every jurisdiction, and none substitutes for another. Whether a given policy is compulsory depends on the jurisdiction, the value of the project, the building type, the licence or registration class held, whether the business employs workers, and the terms of the individual building contract.

Licence conditions in Tasmania

Tasmania directly identifies the builder licence classes that must hold public liability and contract works insurance. Builder (General construction) and Builder Fire Protection Services must hold both contract works and public liability cover; a Builder – Demolisher licence requires public liability cover only.

The minimum public liability indemnity is $5 million for any one claim. Defence costs are payable in addition to that limit, although the policy may cap those costs at 20% of the indemnity limit.

Registration conditions in Victoria

Victoria applies public liability requirements to specified registration classes rather than to builders generally. The requirement applies to builder-demolishers and to erectors and supervisors of temporary structures, at minimums of $5 million, rising to $10 million for the unlimited demolisher class.

Contract requirements in Queensland

Queensland treats public liability and contract works insurance as building-contract requirements rather than general licensing conditions. Queensland Building and Construction Commission guidance states that most building contracts require the contractor to hold both forms of cover.

A contractual requirement is set by the parties to an individual contract rather than by the regulator. The required cover may therefore vary by project, principal and contract.

Jurisdictions where no universal requirement was established

Tasmania expressly makes public liability and contract works insurance licence conditions for specified builder classes. Victoria also imposes public liability requirements on specified registration classes.

This review did not establish an equivalent universal requirement for general builders in New South Wales, South Australia, Western Australia, the Australian Capital Territory or the Northern Territory. This reflects the scope of the official sources reviewed and does not establish that no obligation applies. Particular licence classes, contracts, procurement arrangements or project conditions may impose additional requirements.

Contract works insurance covers unforeseen physical loss of or damage to the building works while construction is underway. Where minimum requirements are set in binding terms, the sum insured must equal the full value of the works, with an allowance for debris removal and professional fees.

Cover generally runs from construction to handover. In Queensland, published examples of insured events include theft, vandalism, fire and storm.

Tasmania's licensing determination sets those minimum standards for a compliant policy across the five elements.

• Property covered: Insured property is defined broadly. It includes engineering construction, mechanical installation or erection work, formwork, falsework, temporary works, temporary buildings, scaffolding and hoardings. It also includes materials supplied for or incorporated into the works, as well as additions, alterations and refurbishment of existing buildings and structures.
• Events covered: The policy must respond to unforeseen physical loss or damage from any cause not otherwise excluded during the construction period and any maintenance period specified in the contract.
• Reinstatement costs: Cover must include the cost of reinstating damaged work, including demolition, debris removal and professional fees necessarily incurred in the reinstatement.
• Minimum sum insured: The minimum sum insured is the value of the works, with an allowance for debris removal and professional fees.
• Permitted exclusions: A policy may exclude fair wear and tear, the cost of making good faulty design, workmanship or materials, consequential loss and damages for delay. However, it may not exclude resulting loss or damage caused by faulty design, workmanship or materials.

Cover extends beyond the builder. A compliant Tasmanian policy insures five categories of party:

• the principal,
• the head or principal contractor,
• the licensed building services provider,
• their directors, partners, officers and employees acting within the scope of their duties
• and subcontractors to the extent required by their subcontract.

Professional consultants are excluded from that definition.

Professional indemnity insurance is mandatory for specified building professionals in New South Wales, Victoria, Queensland and Tasmania. Published minimums run from $500,000 to $5 million, although the requirements apply to different professional classes and are not directly comparable.

The classes named are mostly design, certification, engineering and project-management roles rather than construction ones, so professional indemnity is not a general builder policy.

It covers legal liability arising from professional advice, design, certification, acts, errors or omissions, and it is mandatory for specified regulated classes rather than for everyone described as a builder. New South Wales is the exception in prospect: design practitioners and professional engineers are already required to hold cover, and registered building practitioners will be required to be indemnified under a policy from 1 July 2027.

Professional indemnity also operates on a different basis from the other covers. Claims-made policies generally require a claim to be made and notified during the policy period, subject to applicable retroactive, continuity, extended-reporting and run-off provisions. Tasmania's requirement is drafted on that basis, requiring indemnity for claims first made against the provider and first notified to the insurer during the period of insurance.

Project-specific residential insurance thresholds range from $3,300 in Queensland to $25,000 in the Northern Territory. Published cover figures range from $200,000 to $400,000, although the amounts are set on different bases and are not directly comparable.

Jurisdictions also differ in how cover is imposed and what happens when it is not obtained. Tasmania and Victoria were the only jurisdictions in which the reviewed sources identified public liability requirements imposed through licensing or registration. Tasmania was the only jurisdiction found to impose contract works insurance as a licence condition.

Elsewhere, insurance obligations may arise through project-specific statutory schemes, individual building contracts or both.

Project-specific residential insurance thresholds and cover figures

Most states and territories operate a project-specific residential insurance or fidelity fund scheme under a jurisdiction-specific name. Tasmania has legislated a Home Warranty Insurance scheme under Act 25 of 2023, but the relevant operative provisions had not commenced as at 30 July 2026.

Thresholds are not set on a common basis, so should not be treated as a direct ranking. Queensland has the lowest published threshold at $3,300, applying to most residential construction work. New South Wales, Victoria, South Australia and Western Australia each set their threshold at $20,000.

The Northern Territory's $25,000 applies only to specified work that increases residential floor area, with prescribed new-home work covered separately regardless of value.

A lower threshold does not necessarily indicate broader cover. Thresholds determine when a scheme applies, while cover figures determine the amount or minimum level of protection available under that scheme.