Insurance for building a new home in Australia: costs, cover and requirements

SECTION 01 · SCOPE

What insurance is required when building a new home?

During construction, contract works, public liability, workers' compensation and professional indemnity may apply. Most jurisdictions also require statutory home warranty or indemnity cover above a contract-value threshold. Home and contents insurance generally begins around completion, handover or occupation.

SECTION 02 · CONSTRUCTION COVER

What is the difference between contract works and public liability insurance?

Contract works insurance protects the partially completed home, materials and work in progress against theft, vandalism, fire, storm and similar risks until handover. Public liability insurance covers claims where building work injures another person or damages someone else's property.

Queensland's regulator says most residential contracts require both forms of cover. NSW guidance warns that without them, the owner may be exposed because they own the site where work is being carried out.

Lenders may also require a current certificate of insurance before releasing construction funds.

SECTION 03 · WARRANTY VS HOME

What is the difference between home warranty insurance and home insurance?

Home warranty or indemnity insurance is a statutory scheme protecting eligible homeowners if a builder cannot complete work or fails to fix defects. Ordinary home and contents insurance covers the completed dwelling and belongings. Neither replaces the other.

Seven jurisdictions operate compulsory schemes. Most are last-resort arrangements triggered by a builder's death, disappearance or insolvency. Queensland defect cover and Victoria's First Resort Home Warranty Scheme can respond in other prescribed circumstances.

SECTION 04 · LOCATION RISK

How location and natural hazards affect home insurance costs

Home premiums vary substantially by location. Since 2022, the ACCC has tracked northern Australian insurance prices and the cyclone reinsurance pool. Its fifth and final monitoring report was released in June 2026.

Every northern region remained more expensive than the rest of Australia. North WA's average was about 2.2 times the rest-of-Australia figure in 2024–25. The narrowing gap largely reflected faster premium growth elsewhere, rather than falling northern premiums.

The ACCC linked part of the difference to higher rebuilding costs and more stringent northern building standards.

How the cyclone reinsurance pool affected premiums

Renewal premiums in medium-to-high risk areas fell 11% in year one and 14% cumulatively over two years. ARPC reported a larger 37% fall in highest-risk new-business quotes using a different methodology; the results are not directly comparable.

How affordability could change by 2050

APRA estimates about 1.4 million existing freestanding houses are already priced out on its measure—an annual premium equal to at least four weeks of household income. Under both stress-test scenarios, the share reaches around one in four by 2050, while the rural protection gap exceeds 40%.

SECTION 05 · BUILDING STANDARDS

How flood, bushfire and cyclone standards can affect insurance costs

Hazard-prone sites may require additional construction standards. These can raise estimated rebuilding costs, increasing the sum insured and potentially the premium. No official source publishes a national dollar estimate for this effect.

SECTION 06 · FINANCE

Construction loans and insurance requirements for new homes

Lenders may require proof of current cover before releasing construction funds because the property is security for the loan. After a claim, a cash settlement may be paid to the lender depending on its policy and financial interest.

Under APRA's higher physical-risk scenario, expected annual weather losses rise from under $7 billion in 2024 to more than $16 billion by 2050. Again, this is a stress-test scenario rather than a forecast.

SECTION 07 · RENOVATIONS

What insurance applies to renovations and owner-builder projects?

Knockdown rebuilds and major renovations may be subject to the same thresholds as new-home construction, depending on each scheme's definitions and contract structure. Demolition-only work, retained structures and work below the threshold may be treated differently.

Owner-builder projects also face separate cover and resale rules. In NSW, each directly engaged licensed contractor must provide cover where its contract exceeds $20,000, although the owner-builder's own work is not covered.

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