From 1 July 2027, a registered building practitioner must be indemnified under a professional indemnity (PI) policy for work carried out in that capacity, in addition to taking out Home Building Compensation (HBC) cover where required. Separately, licensed builders and tradespeople must have HBC cover for each home building project over $20,000 including GST; anyone contracting an individual or business for more than $20,000 of home building work should check that the business has valid insurance before paying any money, including a deposit, and before the work starts. The NSW Government’s Insurance cover for building work page, updated 6 July 2026, states these requirements; figures checked 1 October 2026.
Is PI insurance a substitute for HBC cover?
No. The PI requirement is additional to any HBC cover required for the work.
| Cover | Who or what it applies to | Main requirement |
|---|---|---|
| Professional indemnity insurance | A registered building practitioner carrying out work in that capacity | From 1 July 2027, the policy must indemnify the practitioner for that work |
| Home Building Compensation cover | A licensed builder or tradesperson for each home building project over $20,000 including GST | The builder or tradesperson must obtain HBC cover |
| Insurance check before contracting | A person engaging an individual or business for more than $20,000 of home building work | Valid insurance must be checked before any money, including a deposit, and before work starts |
HBC cover, formerly called home warranty insurance, protects homeowners as a last resort if building work cannot be completed or defects cannot be fixed. It does not replace the requirement for a practitioner to be indemnified for their work.
Who must have PI insurance under the 1 July 2027 rule?
From that date, the requirement applies to a person carrying out work as a registered building practitioner. The wording does not make PI cover conditional on the project exceeding the HBC threshold.
Current NSW Government guidance also states that registered design practitioners and professional engineers must have professional indemnity insurance. Their cover may be provided under an individual, partnership or corporate policy.
How should I assess whether my PI policy is adequate?
The NSW Government says practitioners must make sure their policy provides adequate cover to indemnify them for their work. It identifies several factors to consider:
-
Your financial resources
Assess your available financial resources when deciding on appropriate cover. -
Risks associated with your work
Consider the particular risks connected with the work you carry out. -
Policy limits
Check the limits available under the policy. The regulator material cited here does not state one standard PI limit for every practitioner. -
Other regulatory factors
Review the other factors outlined in the Design and Building Practitioners Regulation 2021. -
Your own circumstances
Different practitioners have different business risks, so the adequacy of cover must be assessed against your own circumstances.
You may need to show that you have assessed the adequacy of your cover. The NSW Government also recommends seeking independent advice about the amount and type of cover needed.
How do I check my policy terms?
Read the policy’s Product Disclosure Statement (PDS) and confirm that the cover applies to the work you carry out as a registered building practitioner. The PDS is also the place to check the policy terms rather than relying only on a summary or general description of PI insurance.
If the wording is unclear or you are unsure whether the available limits suit your circumstances, obtain independent advice before deciding.
When should a homeowner or contractor check insurance?
If you are contracting an individual or business to do more than $20,000 of home building work, follow these steps:
- Use the HBC Check online tool.
- Confirm that the business has valid insurance for the work.
- Complete the check before paying any money, including a deposit.
- Complete it again before the work starts if the booking, payment arrangements or project details have changed.
This check addresses the requirement to confirm valid insurance before payment and commencement; it does not assess whether a practitioner’s own PI policy is adequate.
Who can I contact for more information?
For information about home building insurance cover, contact Building Commission NSW:
- Phone: 13 27 00
- Hours: 8:30am to 5pm, Monday to Friday, excluding public holidays
- From overseas: +612 3814 0545
Sources
FAQ
Does PI insurance replace Home Building Compensation cover?
No. From 1 July 2027, the PI requirement applies in addition to taking out HBC cover where required.
Is PI insurance only required for projects over $20,000?
No. The HBC project threshold is $20,000 including GST for licensed builders and tradespeople. The future PI requirement is linked to carrying out work as a registered building practitioner, not to that HBC threshold.
Can design practitioners or professional engineers use a business policy?
The NSW Government states that their PI insurance may be provided under an individual, partnership or corporate policy. Other practitioners should check the regulator information and their proposed policy terms.
What if I am not sure my PI cover is adequate?
Assess your financial resources, work-related risks, policy limits and the other relevant regulatory factors. You may need to document that assessment and should seek independent advice about the appropriate amount and type of cover.
When should I check a builder’s insurance?
Before paying any money, including a deposit, and before work starts. Use the HBC Check tool for home building work contracted for more than $20,000.