Building Indemnity Insurance

You have signed a contract worth hundreds of thousands of dollars. The builder tells you there is Building Indemnity Insurance. That sounds reassuring - and it should.

But what exactly is insured? When does the policy respond? And does the insurance mean you can worry less about progress payments or the contract itself? Understanding what BII is designed to do is just as important as knowing that a certificate exists.

What is Building Indemnity Insurance?

Building Indemnity Insurance - commonly called BII - is a statutory form of last-resort protection for qualifying South Australian domestic building work.

South Australian government guidance states that BII is generally required for qualifying domestic building work that requires development approval and is valued above the applicable statutory threshold. From 10 November 2025 the threshold increased from $12,000 to $20,000. The maximum cover for new policies also rose from $150,000 to $250,000: this higher limit applied to new QBE policies from 1 October 2025 and, from 10 November 2025, is prescribed in the Regulations for all new policies regardless of insurer. Building work at or below the threshold, and certain excluded categories, may not require BII. As these figures are prescribed by regulation, homeowners should verify the current thresholds at the time of their project.

When is BII currently required?

As noted above, BII is generally required for qualifying domestic building work that requires development approval and is valued above the applicable statutory threshold. The requirement applies to the building work contract at the time it is entered into. Building work at or below the threshold, and certain excluded categories, may not require BII.

There are exclusions and special categories. The precise project should be checked rather than assuming that every residential job is insured.

Who arranges it?

The builder is responsible for arranging the policy for qualifying work. The policy is issued for the benefit of the homeowner and qualifying successors in title. Obtain and retain the certificate before physical building work begins where the scheme applies.

Read the certificate - do not merely file it

Check the builder's name, licence details, insured site, description of the work, insurer, issue date and any stated conditions or limitations. Make sure the legal entity named as builder matches the entity in your building contract.

What BII protects against

The scheme is principally directed to loss arising because statutory warranty rights cannot effectively be enforced, and to non-completion, where the builder dies, disappears or becomes insolvent.

What BII does not mean

BII does not guarantee that the builder will finish on time. It does not insure every variation dispute, progress-payment disagreement or complaint about workmanship while the builder remains available and financially able to address the issue.

Your contract remains the primary document regulating the project while the builder is operating.

Policy limits matter

Insurance has limits, exclusions, conditions and an excess. Do not assume that the existence of a policy will make you financially whole if a builder fails part-way through a major project.

Why builder insolvency can be expensive

A replacement builder must inspect another builder's work, price incomplete items, mobilise trades and potentially rectify defects before proceeding. The replacement cost can be materially higher than the unpaid balance under the original contract.

Never pay ahead because 'insurance will cover it'

Paying materially ahead of completed work can increase the homeowner's exposure if the builder later fails. BII should not change your approach to progress claims. Check that the contractual stage has been reached and maintain a running payment ledger.

BII and statutory warranties are connected but different

The statutory warranty is the legal obligation. BII is a separate insurance mechanism supporting specified risks in defined circumstances. They should not be confused.

Pre-signing BII checklist

Confirm the builder holds the appropriate South Australian licence.

Ask whether the project requires BII and why.

Check when the policy will be taken out.

Obtain and retain the certificate where the scheme applies.

Check that the insured builder entity matches the contracting entity.

Understand the policy limit and insurer.

Do not assume BII covers every consequential loss.

Continue to administer progress payments carefully.

The key lesson

Building Indemnity Insurance is important protection, but it is protection of last resort. It is not a substitute for choosing the right builder, understanding the contract, keeping payments aligned with progress and dealing with problems promptly.

Before You Sign

This guide provides general educational information for South Australian homeowners. It is not personalised legal advice. The effect of any issue depends on the wording of your own contract, schedules, Special Conditions, plans, specifications and the facts of the project. A good builder and a well-understood contract should work together. Before committing to one of the largest financial transactions you may ever undertake, consider having the actual contract reviewed so you understand the obligations, notice requirements and consequences before they are tested on site.

Before You Build. One Signature. One Chance.