Homebuilder extension of commencement time limits – What it means for insurance

It has been the talk of the town among builders and tradies since its launch last year. Many welcomed the boost, although critics predicted low take-up. Yet, with almost 82,000 applications since launching last year, it’s safe to say the Federal Government’s Homebuilder Grant has been somewhat game changing for the construction industry in bringing about a substantial increase in demand.

Undoubtedly, the recent extension of the commencement time frame to 18 months for new projects has provided additional relief to builders. The extension of this time limit, as lobbied by the Housing Industry Association, provides builders with additional time to schedule and complete the influx of new projects, ultimately ensuring that homeowners are able to utilise the grant.

“The good work that HomeBuilder has done to stimulate the economy and retain jobs will be fully realised.” Graham Wolfe, HIA Managing Director said in a press release. “Builders can now continue progressing the contracts they have in an orderly way.”

In amongst all this good news though, the changes to timeframes to receive the grant should also act as a timely prompt for builders to check their insurance policies and ensure they continue to be covered for the duration of their project.

Here are 3 key features to ensure you check if the extended deadlines impact your projects’ delivery date.
 

Period of Insurance

Construction Works and Liability insurance policies contain a Construction Period clause. This sets a maximum period of time a builder can take to complete their project. If a specific project extends beyond this maximum period, the respective insurance policy will no longer cover the project.

If you experience a delay in a job which affects the expected delivery date, and your project extends beyond the term of your insurance policy, you may not be covered for the job. For example, if your Construction Works and Liability policy has a 12 month Maximum Construction Period, and your project takes longer than this to complete, you most likely will no longer be covered for this project under your Construction Works policy.

Therefore, it is important you refer to your policy to ensure that you are aware of the Maximum Construction Period, and are able to complete your project by this date.
 

Cessation of work policy exclusion

Another important feature of Construction Works and Liability insurance policies is a Cessation of Works clause, which stipulates a maximum period of time for which a project can be “on hold”. If a specific project extends beyond this maximum period then, again, the policy will no longer cover that project.

The period of time specified in a cessation of works clause varies between policies. Some policies have a 30-day Cessation of Works, whereas other policies allow for a job to be ceased for up to 60 days or even longer.

If you are unable to continue working on-site in any event, your policy will not cover the site beyond the Cessation of Works period. This means that if the site has not been active for more than the Cessation of Works period under your policy, any liability or material damage incidents will be excluded from your policy's cover.

It is therefore also important for builders to check their insurance policies for the Cessation of Works clause, and ensure that no project is on hold for longer than the time period in this clause.
 

Home Warranty Eligibility

Lastly, another very important coverage to review is your Home Warranty Insurance. Remember that before signing on a new project, you’re legally required to have in place Home Warranty Insurance that accounts for the value of your new contracts as well. If you need to apply for additional limit on your Home Warranty cover, this should be done sooner rather than later, and not be left until the last minute. While the past months may have seen some builders struggle to obtain the required levels of cover of Home Warranty Insurance, a broker willing to work with your business to portray your business case to insurers in the best possible light can help ensure you achieve the best outcome.