Home construction insurance.

The collapse of home construction company Beechwood Homes has highlighted the deficiencies in the insurance contract that is supposed to ensure that all homes are completed should a builder default.

Beechwood was the largest building company engaged in new home construction, but insolvency by small builders is a common thing. As a result, owners are left with a partly completed home and building product supply traders are left with unpaid bills.

In the Beechwood incident, three hundred or so owners are left lamenting and waiting advice from the administrator to determine their losses - and what can be done.

Theoretically there shouldn't be a problem. Each builder has a mandated insurance policy that stipulates that the construction will be completed as per the contract specification - and that rectification of any faults will be covered during the warranty period.

In fact this is a shoddy piece of work full of " ifs, buts and maybe's " that seems to limit the insurers liability to a lousy $ 30,000 on the average home.

The collapse of Beechwood Homes is not an isolated event. Similar companies have ceased trading over the years and smaller builders collapse on a regular basis, but the state government has sat on it's hands for decades and done nothing to insist that such home insurance is brought up to date and comprises an iron clad guarantee that the work will proceed to completion.

Maybe a better insurance policy will cost more, but then the biggest investment the average person makes is the family home. Insuring the family car presents no problems so why shouldn't similar guaranteed cover apply to a house under construction ?

Many will have noticed that this state government has made no suggestion of improving home construction insurance. The Premier has suggested that owners are fully covered by the existing scheme, but what he failed to say was that such insurance is on percentage of the contract price basis - and this leaves the average home owner substantially out of pocket.

It is time to clean-up the home construction insurance mess for all future contracts.
Perhaps the best way would be for an open tender to allow the insurance industry to specify the cover they are prepared to offer rather than the government nominate the details.

Insurance is a highly competitive industry and the incentive of being guaranteed all the work in the home construction industry would be a mighty reason for risk analysists to sharpen their pencils !

The home buyer needs a better deal !