Builder Insolvency

If your builder becomes insolvent mid-build, the consequences can be significant. A separate guide explains Building Indemnity Insurance in detail, including policy limits and how the scheme works. This guide focuses on the practical consequences of builder insolvency for the homeowner and what steps to take.

Building Indemnity Insurance may respond

BII is last-resort cover that can apply where the builder dies, disappears or becomes insolvent, up to the policy limit for the relevant policy.

Cover is capped

The maximum cover is limited and is set by regulation. For new policies the limit increased to $250,000 from 10 November 2025, but a major build can still exceed what the policy pays, and the prescribed figure can change - confirm the current limit that applies to your project.

Paying ahead increases exposure

Money paid materially ahead of completed work can be difficult to recover if the builder fails. Keep payments aligned with progress.

Expect delay and disputes

A replacement builder must assess, price and rectify another builder’s work, which can cost more than the unpaid balance.

Records matter

A clear payment ledger and progress records help establish what was paid versus what was done.

Questions to ask before signing

What insurance responds if the builder becomes insolvent? What is the policy limit? How are payments aligned with progress? What records should I keep?

The key lesson

Insurance is a safety net, not a guarantee. Keeping payments matched to progress is your best protection against a builder failure.

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.