Last reviewed: August 2026
Home Building Compensation cover, usually called HBCF, is required for most residential building work in NSW over $20,000 including GST. It protects you if your builder cannot finish the job or cannot fix defective work, because they have become insolvent, died, disappeared, or had their licence suspended for not complying with a court or tribunal order to pay you.
It is last resort cover. That phrase does a lot of work, and this article explains what it means for you.
When it is required, and when it must be in place
HBCF is required for most residential building projects over $20,000 including GST, unless the project is exempt. A granny flat is well over that threshold.
The timing matters as much as the requirement. The builder must have cover in place before they start work or take any payment, including a deposit.
If you are asked for a deposit and told the insurance is coming, that is the wrong sequence.
What “last resort” actually means
HBCF is not general building insurance and it does not cover ordinary disputes.
It steps in only when your builder cannot put things right themselves. According to icare NSW, that usually means the builder has:
- become insolvent, for example bankrupt or in liquidation
- died
- disappeared and cannot be found
- had their licence suspended for failing to comply with a court or NSW Civil and Administrative Tribunal order to pay you money
If your builder is still trading, you generally need to pursue the issue with them first, including through dispute resolution.
What you may be covered for
| Situation | What may be covered |
| Work never started | Loss of your deposit |
| Work not finished | The cost to complete the work, up to the policy limit |
| Major defects | The cost to fix |
| Other defects | The cost to fix |
The time limits
| Type | Cover period |
| Major defects, such as serious structural problems or serious water leaks damaging the building | 6 years from completion |
| Other defects, such as non-structural problems and poor finishes | 2 years from completion |
If you find a defect in the last six months of the cover period, you may have another six months to notify.
The claim limit
There is a maximum claimable on each policy:
| Policy issued | Maximum |
| Before 1 February 2012 | $300,000 |
| Other policies | $340,000 |
That total is for the property, including any claims made by previous owners. It is worth knowing if you are buying a property where work has been done before.
What HBCF does not cover
- General wear and tear
- Maintenance issues
- Changes of mind about design or materials
- Work done by unlicensed builders
- Disputes where the builder is still trading and able to fix the problem
- Costs outside the policy time limits
- Costs above the maximum cover amount
That fourth one deserves emphasis. Work done by an unlicensed builder is not covered. Using an unlicensed builder to save money removes the protection that exists precisely for when things go wrong.
How to check cover exists for your job
You do not have to take anyone’s word for it. icare maintains the HBCF Certificates Register, accessible through Verify NSW.
The register shows:
- whether a policy was issued
- the insured builder
- the property address
- whether any claims have already been paid
Check it before you pay a deposit, and check it again before construction starts. It takes a couple of minutes.
That last field is also useful if you are buying a property with an existing granny flat, because prior claims count toward the same policy limit.
What this means practically when choosing a builder
Three things follow from all of the above.
- Verify the licence. Unlicensed work is not covered at all, so the licence check is also an insurance check.
- Sight the certificate before paying anything. Cover must be in place before work starts or payment is taken.
- Check the entity matches. The insured builder on the certificate should be the same entity signing your contract.
Frequently asked questions
Is HBCF the same as home warranty insurance?
They are commonly used to mean the same thing in NSW. The current scheme is the Home Building Compensation Fund, administered by icare.
Who pays for HBCF cover?
The builder takes out the policy and the cost is generally reflected in the contract price. The policy protects you as the homeowner.
Does HBCF cover me if I just do not like the finish?
No. It does not cover changes of mind, wear and tear, or maintenance. It covers incomplete work and defective work, and only once a trigger event has happened such as the builder becoming insolvent.
What if my builder is still trading but will not fix a defect?
HBCF generally will not respond while the builder is still trading and able to fix the problem. The path in that situation is to pursue the builder directly, including through dispute resolution or NCAT. NSW Fair Trading can explain the options.
Are legal costs covered?
In some cases costs directly related to investigating a problem, assessing the cost or supporting a claim may be considered, but they are not automatically covered. Once a formal claim is lodged, icare states it cannot pay legal costs where you keep a lawyer involved in managing the claim.
How do I know how much cover my policy has?
The claim limit is $340,000 for policies other than those issued before 1 February 2012, which are $300,000. The register will confirm a policy exists and whether prior claims have been paid against the property.
Ask for the certificate
Any builder should be able to produce the HBCF certificate for your job before you pay a deposit. If asking feels awkward, it should not. It is the protection the scheme exists to give you.
Call BlueGum on 1300 060 651, or book a site assessment.
BlueGum Granny Flats is a licensed NSW builder, licence number 247388C. HBCF details in this article are drawn from icare NSW as at August 2026 and are general information only. Scheme rules, limits and requirements change from time to time. Confirm the current position with icare NSW or NSW Fair Trading, and seek your own advice about your circumstances.
