FREQUENTLY ASKED QUESTIONS

For Builders & Tradespeople

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For Homeowners

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FOR BUILDERS

What is the difference between public liability and professional indemnity insurance?

 

Public liability insurance covers you if you cause accidental physical damage to someone’s property. This can also include the loss of use of undamaged property. For example, a scaffolding pole falls and damages the neighbour’s house.

Professional indemnity covers claims against you for financial loss due to a mistake in your professional service. For example, the owner of a house you’ve built decides they’re not happy with some aspect of it and claims that you’ve breached your “duty of care” to them. This could happen even if it’s some years after you’ve finished the job!

I'm an employee with an LBP license, should I get my own insurance?

As an LBP unhappy clients can make a complaint to the Building Practitioners Board, which you will have to defend. The cost of defending yourself can be covered by insurance, as can the cost of any fines that are imposed.

Your employer may take out insurance that covers their employees, but if there’s an issue in the future and you’ve moved on or the company had closed up you’re unlikely to be covered.

Of more concern to most builders & tradies is the risk of civil court claims, where a homeowner takes the company to court over an issue that they claim has cost them money. The LBP may be joined in to that legal case too.

This can be covered by professional indemnity insurance and as an employee you should enquire whether your employer has cover. Many LBPs, particularly those signing off work on behalf of their employer, prefer to have their own policy that they can take with them wherever they go.

Does having an LBP license mean I have more liability?

No, you are still working under the same regulation and legal obligations under the Building Act and in contract law as you always have, and as most professionals and business people do. Licensing hasn’t changed this.

However, you can be brought before the Licensed Building Practitioners Disciplinary Board now and they can impose a range of penalties, including fines of up to $10,000.

The more concerning change is that consumers are becoming more willing to have a go at you if they’re unhappy with some aspect of your service. And you’re easier to track down now that you have to submit a Record of Work for the restricted building work you do.

Builders have also been under-insured compared to other building industry professionals, such as architects, engineers and building inspectors, who all have professional indemnity insurance in case they make a mistake (or are responsible for mistakes made by subbies for example). Cover that is specially designed for construction contractors is now available from Builtin.

Because my liability still lasts for 10 years do I have to keep paying for my insurance when I retire or leave the industry?

You don’t have to continue to pay your insurance, it is up to you. However, if you want to be covered for the period of your liability after you stop trading, then we can switch the policy to what’s known as “run off cover”. This means that your premium gets cheaper each year after you’ve stopped working, until you no longer require cover.

What are damages?

Damages are defined as “monetary compensation awarded through a court.”

What is the difference between insurance and a guarantee?

Put simply a guarantee or warranty means that if a particular event happens, the guarantor will do something if the guaranteed party can’t or won’t.

Insurance means that in the event of a particular insured event happening, the insurer will pay.

A simple comparison may help explain the difference:

INSURANCE GUARANTEE
2 Party Contract
(Builder or Owner and Insurer)
3 Party Contract
(Builder, Owner & Surety Underwriter)
Duty of Utmost Good Faith Disclosure: as in ordinary contract law
Cancellable (generally) Non-cancellable (generally)
Calculates premium based on losses No loss anticipated, fee for service
Involves transfer of risk to insurer No transfer of risk
No reimbursement from insured Responsible party reimburses surety underwriter for losses
Who underwrites your policies?

We work with a range of licensed insurers to ensure we get the best possible terms and expertise available.

Are you a member of a dispute resolution service?

Yes, as registered financial advisers Builtin we are a participant in the Insurance & Financial Services Ombudsman Scheme (IFSO Scheme). The IFSO Scheme resolves complaints about insurance and financial services. It is a free service for our customers.

Please contact us in the first instance if you have a problem or concern. If we are unable to resolve your problem, contact the IFSO Scheme: www.ifso.nz, email: info@ifso.nz, phone: 0800 888 202.

How much will a 10 Year Building Warranty cost?

 

Builtin’s 10 Year Building Warranty is very reasonably priced considering it covers you for 10 years. The fee depends on the value of the building contract and your builder will be able to tell you the price of a warranty for your particular project, however the average is around $1,300.

When should I apply for a warranty?

A warranty application should be made as soon as a deposit is paid, and if there is no deposit, before work commences. You must ask your builder to apply for the warranty on your behalf. Generally the application form is completed and signed by both parties at the same time you sign the building contract.

Who completes the warranty application form?

The builder is generally responsible for completing the application form.  However, we require it to be signed by both the builder and the homeowner.  Ask your builder to contact us for a copy of the application form.

What extra information is needed with a warranty application?

Applications must be accompanied by a copy of your payment schedule and detailed quote/scope of works.

What if I don’t have the Building Consent?

It’s not a problem if you don’t have the Building Consent at the time of lodging the warranty application. Just note when you expect to obtain it on the form.

How long will it take to receive confirmation that my warranty application has been received?

We’ll assess the application within 10 working days from receipt of a properly completed and signed application.

How do I know my warranty application has been accepted?

When the warranty has been accepted we issue a Warranty Certificate to both builder and homeowner, along with a copy of the terms & conditions. If you have not received yours please contact us.

When does cover start under the warranty?

Loss of deposit and non-completion cover starts from the date the underwriter accepts the application. So, it is important to ensure your warranty application is made as early as possible, ideally when you sign the building contract and before any deposit is paid.

Cover for defects begins from practical completion or achieving code compliance, whichever is earlier.

Can I transfer the warranty when I sell the house?

Yes. A transfer application should be completed once a sale & purchase agreement is completed. Applications for transfer should be made within 60 days of the settlement date. A fee is payable. Please contact us to request a transfer application form.

How is an insurance-backed warranty different from my legal rights under consumer protection law?

The Building Act and Consumer Guarantees Act provide homeowners with legal rights when it comes to the products and services they buy. They mean that your builder is responsible for ensuring their work is fit for purpose and they must fix defects they are responsible for for up to 10 years.

However, if your builder is no longer trading and can’t complete the work or return to fix defects then this legal protection is of no value at all. That’s where an independently-insured warranty like ours adds real value and peace of mind.

FOR HOMEOWNERS

What is the difference between insurance and a guarantee?

Put simply a guarantee or warranty means that if a particular event happens, the guarantor will do something if the guaranteed party can’t or won’t.

Insurance means that in the event of a particular insured event happening, the insurer will pay.

A simple comparison may help explain the difference:

INSURANCE GUARANTEE
2 Party Contract
(Builder or Owner and Insurer)
3 Party Contract
(Builder, Owner & Surety Underwriter)
Duty of Utmost Good Faith Disclosure: as in ordinary contract law
Cancellable (generally) Non-cancellable (generally)
Calculates premium based on losses No loss anticipated, fee for service
Involves transfer of risk to insurer No transfer of risk
No reimbursement from insured Responsible party reimburses surety underwriter for losses
Who underwrites your policies?

We work with a range of licensed insurers to ensure we get the best possible terms and expertise available.

Are you a member of a dispute resolution service?

Yes, as registered financial advisers Builtin is a member of The Insurance & Savings Ombudsman Scheme at PO Box 10-845, Wellington 6143.  If you have  problem, concern or complaint about our service please contact us in the first instance.

If we cannot agree on how to fix the issue, or if you decide not to use the internal complaints scheme, you can contact The Insurance & Savings Ombudsman. This service will cost you nothing, and will help us resolve any disagreements. Their phone number is: 0800 888 202.

How much will a 10 Year Building Warranty cost?

Builtin’s 10 Year Building Warranty is very reasonably priced considering it covers you for 10 years. The fee depends on the value of the building contract and your builder will be able to tell you the price of a warranty for your particular project, however the average is around $1,300.

When should I apply for a warranty?

A warranty application should be made as soon as a deposit is paid, and if there is no deposit, before work commences. You must ask your builder to apply for the warranty on your behalf. Generally the application form is completed and signed by both parties at the same time you sign the building contract.

Who completes the warranty application form?

The builder is generally responsible for completing the application form.  However, we require it to be signed by both the builder and the homeowner.  Ask your builder to contact us for a copy of the application form.

What extra information is needed with a warranty application?

Applications must be accompanied by a copy of your payment schedule and detailed quote/scope of works.

What if I don’t have the Building Consent?

It’s not a problem if you don’t have the Building Consent at the time of lodging the warranty application. Just note when you expect to obtain it on the form.

How long will it take to receive confirmation that my warranty application has been received?

We’ll assess the application within 10 working days from receipt of a properly completed and signed application.

How do I know my warranty application has been accepted?

When the warranty has been accepted we issue a Warranty Certificate to both builder and homeowner, along with a copy of the terms & conditions. If you have not received yours please contact us.

When does cover start under the warranty?

Loss of deposit and non-completion cover starts from the date the underwriter accepts the application. So, it is important to ensure your warranty application is made as early as possible, ideally when you sign the building contract and before any deposit is paid.

Cover for defects begins from practical completion or achieving code compliance, whichever is earlier.

Can I transfer the warranty when I sell the house?

Yes. A transfer application should be completed once a sale & purchase agreement is completed. Applications for transfer should be made within 60 days of the settlement date. A fee is payable. Please contact us to request a transfer application form.

How is an insurance-backed warranty different from my legal rights under consumer protection law?

The Building Act and Consumer Guarantees Act provide homeowners with legal rights when it comes to the products and services they buy. They mean that your builder is responsible for ensuring their work is fit for purpose and they must fix defects they are responsible for for up to 10 years.

However, if your builder is no longer trading and can’t complete the work or return to fix defects then this legal protection is of no value at all. That’s where an independently-insured warranty like ours adds real value and peace of mind.

Should I have a written contract?

The Building Act requires a written contract to be in place for all residential building work over $30,000 incl GST, and there are minimum terms and default provisions that must be included.

For projects worth less than $30,000 you are not legally required to have a written contract, but it is strongly advised that you do. An oral contract may still be legally binding, but will be much more difficult to enforce if there is a problem. It is also unlikely to cover many of the simple protections (for both parties) that a typical written building contract will include.

 

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