Domestic Building Insurance and the Vanishing Builder
A couple engaged a builder for a $180,000 extension including a new bathroom and relocated kitchen plumbing. The builder took a 20% deposit, poured the slab, roughed in the plumbing, then stopped answering calls. The company is now in liquidation. The couple paid a total of $61,000. They have a written contract, receipts, and photos. The plumbing rough-in has no compliance certificate on file. They ask the plumber who is quoting the completion whether their insurance will 'cover everything, including the plumbing'.
1. Explain the role of domestic building insurance here and what is and is not likely covered.
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Domestic building insurance is required for domestic building work over the threshold (currently $16,000 including labour and materials) and is taken out by the builder before work starts. It responds when the builder dies, becomes insolvent, or disappears - which appears to be the case here.
Cover typically extends to completing the contract and fixing defects, up to the policy limit, but it does not cover everything. It generally will not pay for work the builder never contracted to do, and it does not replace the need for compliant plumbing documentation. The absence of a compliance certificate for the rough-in is a problem the insurer and the new plumber will both flag: the rough-in may need to be inspected and certified before it is enclosed.
The couple should lodge a claim promptly with evidence of payments, contract, and the liquidation, and keep the insurer informed before authorising any completion work.
2. What should the quoting plumber advise the couple before starting completion work?
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The plumber should advise: (1) do not cover or alter the existing rough-in until it has been inspected and, if necessary, certified - otherwise evidence is lost and the insurer may dispute the claim; (2) get the insurer's written approval for the scope and cost of completion work before starting, or the claim may be reduced; (3) obtain any missing approvals for the plumbing scope; (4) keep a clear record of what was inherited versus newly installed, with photos and dates.
The plumber should also be honest that insurance will not automatically 'cover everything' - it responds within policy limits and conditions, and the couple may still bear a gap between the policy limit and the real completion cost. Setting that expectation now prevents a later dispute with the plumber.