What Happens If Your Builder Goes Bust? Home Warranty Insurance Explained (2026)

Last updated 6 October 2026. Written by the REIN Editorial Team. Researched with the help of AI tools, then fact-checked against the sources below.

Reviewed by Scott Fraser, founder of REIN, licensed real estate agent (NSW) with 10 years on the developer side of house and land.

Quick Answer: What Happens If Your Builder Goes Bust?

If your builder goes bust, work on your home stops and an insolvency practitioner (an administrator or liquidator) takes control of the company. Your main protection is home warranty insurance, which every state requires on residential building contracts above a set value. It can pay to finish the home or fix defects, up to a cap: $200,000 in Queensland (QBCC), $340,000 in NSW (HBCF), $400,000 in Victoria for contracts signed from 1 July 2026, and $200,000 in Western Australia. Strict conditions and deadlines apply. In Queensland, for example, a non-completion claim must be lodged within 3 months of the contract ending.

Buying a house and land package? Get the package checked before you sign, including the builder, the contract and the insurance certificate.

What Is Home Warranty Insurance?

Home warranty insurance protects home owners when a residential builder can’t finish the job or fix defective work, usually because the builder has become insolvent, died or disappeared. Each state runs its own scheme under its own name:

Queensland: the Queensland Home Warranty Scheme, run by the QBCC.
NSW: Home Building Compensation (HBC) insurance, provided through the Home Building Compensation Fund (HBCF) and regulated by SIRA.
Victoria: Home Warranty from the Building and Plumbing Commission (BPC) for contracts signed from 1 July 2026. Earlier contracts fall under Domestic Building Insurance (DBI).
Western Australia: home indemnity insurance, sold by private insurers approved by the Minister for Commerce.

The builder arranges the cover, and the cost is built into your contract price. In Queensland, the QBCC says the contractor collects the premium from the home owner, it must be included in the contract, and it must be paid before work begins.

Home Warranty Insurance by State

Here’s how the main schemes compare, from each regulator’s own material (accessed 6 October 2026). Limits and conditions change, so check the current rules for your state before you rely on them.

State and scheme	Required for work over	Maximum cover	How long cover lasts	When you can claim
QLD – QBCC Home Warranty Scheme	$3,300	$200,000 per claim	6 years 6 months (can extend by 6 months)	Non-completion (fixed-price contracts only), defects, subsidence
NSW – HBC insurance (HBCF)	$20,000	$340,000 per dwelling; incomplete work capped at 20% of the contract price	6 years for major defects, 2 years for other defects	Builder dies, becomes insolvent, disappears, or has their licence suspended for not complying with an NCAT or court order
VIC – BPC Home Warranty (contracts from 1 July 2026)	$20,000	$400,000 in total per home	Up to 6 years for major defects, 2 years for other defects	Work is incomplete, defective or non-compliant and the builder fails or refuses to complete or fix it
VIC – Domestic Building Insurance (contracts before 1 July 2026)	$16,000	$300,000	See your policy certificate	Builder died, disappeared or became insolvent
WA – Home indemnity insurance	$20,000	$200,000 (or the contract value if less); deposits up to $40,000	6 years from practical completion	Builder dies, disappears, becomes insolvent, ceases to exist, or loses registration for failing financial requirements

QBCC home warranty insurance (Queensland)

Queensland’s scheme covers residential construction work worth more than $3,300, including materials, labour and GST. It pays up to $200,000 per claim. The QBCC’s builder insolvency fact sheet notes cover of $300,000 where the owner chose additional cover.

A non-completion claim only applies to a fixed-price contract. Cost-plus contracts are covered for defective work only. The contract must also have ended properly, for example by a valid termination for the contractor’s default, or because the contractor is insolvent and the QBCC has cancelled their licence. You then have 3 months from the date the contract ended to lodge the claim.

If work had started, the QBCC pays the difference between the contract funds you still hold and the real cost to finish, up to the cap. If no work had started, it refunds the deposit, up to the legal maximum. The QBCC reduces claims where the owner paid a deposit above the legal maximum, paid ahead of schedule, or signed a contract priced more than 30% below the real value of the work.

You can also search the QBCC register to see whether home warranty insurance is attached to a property before you buy it.

HBCF insurance (NSW)

In NSW, HBC insurance is required for residential building work over $20,000, including GST. The icare homeowner fact sheet says the builder must get it before starting work or taking any money under the contract, including the deposit. Cover is up to $340,000 per dwelling, with incomplete work limited to 20% of the contract price (as varied).

NSW is a “last resort” scheme. You can only claim if the builder dies, becomes insolvent, disappears, or has their licence suspended for not complying with an NCAT or court order. Claims for incomplete work must be made within 12 months of the date work stopped. Check that a certificate exists using the NSW Government’s HBC Check tool.

Domestic building insurance and Home Warranty (Victoria)

Victoria changed its scheme on 1 July 2026. For contracts signed from that date, the BPC provides Home Warranty on eligible work over $20,000. It can respond when work is incomplete, defective or non-compliant and the builder fails or refuses to fix it, not only when the builder has collapsed. Total assistance is capped at $400,000 per home.

Contracts signed before 1 July 2026 stay under Domestic Building Insurance (DBI). DBI pays up to $300,000, and only when the builder has died, disappeared or become insolvent.

Home indemnity insurance (Western Australia)

WA requires home indemnity insurance on residential building work over $20,000. It pays up to $200,000, or the contract value if that’s lower, and covers deposits up to $40,000. Cover runs for six years from practical completion, and the insurer can charge a $500 excess.

What Happens When Your Builder Goes Into Liquidation?

The QBCC’s builder insolvency fact sheet sets out what home owners should do first. They’re a sensible starting point in any state.

Confirm the builder’s status. Search ASIC’s company register if the builder is a company, or the AFSA bankruptcy register if they’re a sole trader or partnership.
Contact the insolvency practitioner. If the builder is a company, contact the appointed administrator or liquidator straight away. They control the company’s assets and will tell you what’s happening with your contract.
Keep every document. Hold on to the contract, variations, invoices, receipts, emails, inspection reports and progress photos. You’ll need them to prove what was paid and what was built.
Don’t pay ahead of the work. Payments made ahead of the agreed schedule can reduce what the insurer pays.
End the contract correctly. In Queensland, a non-completion claim needs the contract to have ended in one of the ways the QBCC accepts. Get legal advice before you terminate.
Lodge the claim on time. In Queensland that’s within 3 months of the contract ending. In NSW, incomplete work claims are due within 12 months of work stopping.
Get the home finished. Once a claim is accepted, another builder completes the work, within the scheme’s cap and process.

For real examples of what a collapse means for investors, read what happened to Impact Homes and Privium and the Dashdot collapse explained.

What Home Warranty Insurance Won’t Fix

Home warranty insurance is a safety net, not full protection. For house and land investors, watch for these gaps:

The land isn’t part of it. A house and land package is usually two contracts. Home warranty insurance covers the building work, not the land purchase.
The cap may not cover the full cost. If finishing the home costs more than the remaining contract funds plus the cap, you pay the difference. In NSW, incomplete work claims are also capped at 20% of the contract price.
Contract type matters. In Queensland, cost-plus contracts have no non-completion cover.
Deadlines are strict. Miss the lodgement window and the claim can fail.
Overpayments reduce the payout. Deposits above the legal maximum and payments ahead of schedule can cut what you receive.

How to Protect Yourself Before You Sign

The cheapest protection comes before the contract is signed:

Check the builder’s licence with the state regulator, and read what past clients say. Our house and land builder reviews cover the builders most often packaged for investors.
Ask for the home warranty certificate before you pay any deposit, and check it on the regulator’s register.
Prefer a fixed-price contract. In Queensland, only fixed-price contracts carry non-completion cover.
Match progress payments to stages. Never pay for work that hasn’t been done, and keep deposits within the legal maximum for your state.
Understand how the package is put together. Read how house and land packages work, including who gets paid when you sign.

How to Protect Yourself During Construction

Use an independent inspector at each stage. Stage reports give you evidence of what was built if you ever need to claim. See our guide to building inspections for new builds.
Watch for early warning signs. Long gaps with no trades on site, unexplained delays or requests for payments ahead of schedule are all reasons to ask questions in writing.
Keep records as you go. Photos, emails and receipts are much easier to collect during the build than after a collapse.
Inspect properly at handover. Use our practical completion inspection checklist, and know the common building defects to look for.

Common Questions About Home Warranty Insurance

What does home warranty insurance cover?

It covers the cost of finishing the home or fixing defects when the builder can’t, up to the state’s cap. Depending on the state, that’s when the builder dies, disappears or becomes insolvent, or (in Queensland and in Victoria from 1 July 2026) when the builder fails to complete or fix the work.

Who pays for home warranty insurance?

The builder arranges it, and the premium is passed on to you through the contract price. In Queensland, the QBCC says the premium must be included in the contract and paid before work begins.

Is HBCF insurance the same as home warranty insurance?

Yes. HBCF (Home Building Compensation Fund) is the NSW version of home warranty insurance. It’s a last-resort scheme, so you can only claim if the builder dies, becomes insolvent, disappears, or has their licence suspended for not complying with an NCAT or court order.

How long do I have to make a QBCC home warranty claim?

For non-completion, the QBCC says you must lodge within 3 months of the date the contract ended. The contract itself must end within 2 years of the contract date (if no work started) or of the date work started.

What happens to my deposit if my builder goes bust?

In Queensland, if no work had started, the scheme refunds the deposit paid or the legal maximum deposit, whichever is less. In WA, home indemnity insurance covers deposits up to $40,000. In NSW, the builder must hold HBC insurance before taking any money, including the deposit.

Does home warranty insurance cover the land in a house and land package?

No. It covers residential building work. The land is a separate purchase, usually under a separate contract.

Can someone check my house and land package before I sign?

Yes. REIN reviews house and land packages before you sign, including the builder and the contract, and shows you the builder commission built into the price. Book a free review.

Haven’t Signed Yet? Get Your Package Checked First.

Insurance helps after something goes wrong. The better protection is choosing the right builder and contract in the first place. Builder commissions can run into tens of thousands of dollars, and they’re usually built into the package price. We’re buyer-only: we check the package, rebate 100% of the commission to you, and a REIN service fee applies.

GET MY PACKAGE CHECKED or call 1300 446 445.

Sources

QBCC – What is home warranty insurance? (accessed 6 October 2026)
QBCC – Home warranty for non-completion claims (accessed 6 October 2026)
QBCC – Builder insolvency and financial difficulty fact sheet (PDF) (accessed 6 October 2026)
SIRA – Home building compensation (accessed 6 October 2026)
icare – HBCF homeowner fact sheet (HBCF0034, PDF) (accessed 6 October 2026)
Building and Plumbing Commission (VIC) – Home Warranty (accessed 6 October 2026)
Building and Plumbing Commission (VIC) – Domestic Building Insurance and Home Warranty (accessed 6 October 2026)
WA Government – Home indemnity insurance information sheet (PDF) (accessed 6 October 2026)

Disclaimer: This material is general information only and does not take your personal circumstances into account. It is not financial, legal, insurance or tax advice. Home warranty schemes, limits and deadlines differ by state and can change, so check with your state regulator and your contract, and get legal advice before terminating a building contract. While we try to keep content accurate and current, we make no warranties as to accuracy or completeness and accept no liability for any loss arising from reliance, to the fullest extent permitted by law. You should seek your own independent professional advice.