Contract Works Insurance: Cover Homeowners Don't Know They Need
Nathan Strawbridge
Director
If you've never heard the term "contract works insurance" before, you're not alone.
It rarely comes up until a builder's contract lands in front of you with a clause about it – and by then it's natural to wonder why you're being asked to sort out insurance for someone else's job.
Here's the short version: it's not for someone else's job. It's for yours.
Two different types of insurance, covering two different things
When you're getting work done on your home, there are two types of insurance worth understanding. They sound similar, but they cover genuinely different risks.
- Public liability insurance is the builder's insurance. It covers them if they cause accidental damage to your property, or if someone is injured, as a result of the work. If a tradesperson on site damages something of yours by accident, this is generally the policy that responds.
- Contract works insurance covers the build itself – the physical structure being built or renovated, and the materials involved – against things like fire, storm damage, and theft, while the work is underway. It's sometimes also called "builder's risk" cover.
The important distinction: public liability protects against the builder causing harm to someone or something else. Contract works insurance protects the project itself from things that go wrong regardless of whose fault it is.
Why this matters more for renovations than new builds
For a brand new, stand-alone build, the builder will typically arrange contract works insurance themselves, because the structure doesn't exist yet – there's nothing for your existing house insurance to cover.
For a renovation or alteration to an existing home, it's a different story. Your contract should clearly state who's responsible for arranging this cover – and for renovation work, that responsibility often falls to you, the homeowner, not your builder.
This catches people out because it feels backwards. You're paying someone to do the work, so surely they're covering it? Not necessarily. Standard house insurance policies vary on what they'll cover during construction – some allow for minor repairs without extra cover, and we've heard of providers offering renovation cover up to around $80,000 within a standard policy. But the only way to know what your policy actually covers is to ring your insurer directly and ask:
"I'm having [the work] done. Does my current policy cover this, or do I need to take out additional cover?"
If you skip that step and something goes wrong – a fire, a storm, a burst pipe during the works – there's a real chance your insurer won't pay out, because you were doing work outside what your policy assumed.
What it doesn't cover
Contract works insurance isn't a safety net against a builder taking your money and not finishing the job. That's a different risk entirely, and it's why everything in our companion article about choosing a builder you can trust – contracts, deposits, disclosure statements, checking licences – still matters regardless of what insurance is in place.
What contract works insurance does cover is physical loss or damage to the build itself. A simple example: if a builder leaves materials on site – say, a stack of roofing iron – and it gets stolen overnight, that loss generally sits with whoever owns the property, because the materials are on your site. It's exactly the kind of cost that contract works insurance is there for, and exactly the kind of cost most people don't think about until it happens.
A third type, worth asking about: defective workmanship cover
Separate again from the two above is defective workmanship cover (sometimes bundled with broader professional cover). This is insurance the builder holds against their own workmanship failing after the fact – if something they or one of their subtrades built turns out to be faulty, this is what backs a claim to put it right.
Not every builder carries this. It's a genuine cost on their end – we pay several thousand dollars a year for it – which is part of why a properly insured, properly run building company isn't always going to be the cheapest quote on the table. It's also part of why it's worth asking.
What to actually do
Before work starts on your home:
- Call your home insurer. Tell them what work is happening and ask directly whether your existing policy covers it, or whether you need separate contract works cover.
- Check your contract. It should state clearly who is arranging contract works insurance – you or the builder – and the answer should make sense for the type of work being done.
- Ask your builder about their public liability cover. This is theirs to hold, and a reasonable thing to confirm before work begins.
- Ask if they carry defective workmanship cover. Not every builder will, but it's worth knowing either way.
- Don't assume "insurance" means "covered." Each type protects against something different. None of them protect you from a dishonest builder – that's a separate problem, solved with a proper contract, not an insurance policy.
It's a five-minute conversation that most people only have after something's already gone wrong. Better to have it before.
