Domestic Building Insurance Exclusions in Victoria

What it is

Domestic Building Insurance (DBI) is the Victorian last resort cover that sat behind residential building work for contracts signed before 1 July 2026. It was required for work valued over $16,000 and, for homes up to three storeys, generally provided cover of up to $300,000.

The Victorian Building Authority became the Building and Plumbing Commission (BPC) on 1 July 2025. On 1 July 2026 Home Warranty replaced DBI for new eligible contracts. Home Warranty applies to work valued over $20,000, carries up to $400,000 per home and is not limited to the death, disappearance or insolvency of the builder.

DBI has not gone anywhere. A certificate of insurance issued before 1 July 2026 continues on its own terms, structural cover runs six years from completion, and DBI cover does not transfer to Home Warranty. What follows is what those live DBI policies do not pay for.

The four triggers, and the one that is hard to use

A DBI policy covers loss from non-completion or breach of statutory warranty only if the builder has died, disappeared, become insolvent or failed to comply with a Tribunal or Court Order. The fourth trigger looks like a route around a solvent builder who will not rectify. In practice it is a long road.

A builder has only failed to comply once every appeal period has run out, the owner has served a written demand for compliance, more than 28 days have passed since that demand, and the owner has made a statutory declaration setting out how the builder has not complied.

The definition also carves out orders that never count. A Tribunal or Court Order excludes an order made because the builder defaulted on terms of settlement, an interim order, an order made without a hearing on the merits, and a dispute resolution order under Division 6 of Part 4 of the Domestic Building Contracts Act 1995. A DBDRV order is not a ticket into the policy.

The cap and the sub-limits inside it

The headline is $300,000. The detail is what bites.

• The insurer will not pay more than $300,000 in total in the aggregate for all claims for each home. Rectification above that figure is the owner's problem.
• The cap includes the reasonable legal costs of a successful claim against the insurer. It does not include the legal costs of obtaining the Tribunal or Court Order in the first place.
• Non-completion is limited to 20 per cent of the building contract price, adjusted for agreed variations. A builder who collapses at lock-up on a 600,000 dollar contract leaves a 120,000 dollar non-completion ceiling, not $300,000.
• Alternative accommodation, removal and storage are capped at 60 days.
• Where a claim is paid on common property, the cover left for each home in the plan of subdivision is reduced by dividing the payout by the number of homes.

The cover periods and the excess ladder

Non-structural defects are covered from the commencement date until two years after completion of the work or termination of the contract, whichever is earlier. Everything else, including structural defects, runs to six years on the same basis.

Claims under $500 made between three and 12 months after completion are not paid at all. Claims made between one and three years after completion carry a $500 excess, between three and five years a $750 excess, and later than five years a $1,000 excess.

What the policy will not pay for

• damages, fines or penalties for delay
• any amount exceeding what should have been paid to the builder under sections 11 and 40 of the Domestic Building Contracts Act 1995, which penalises owners who paid ahead of the schedule
• landscaping, paving, retaining structures, driveways and fencing, unless the work is integral to the building, needs a building permit, could cause water penetration, affects health or safety, affects structural adequacy or is unfinished
• fair wear and tear, or loss from the owner's failure to maintain the work
• visible defects the owner should reasonably have known about when acquiring the building
• consequential loss of any kind, including loss of rent, loss of value, loss of opportunity, inconvenience or distress
• risks normally insured under a public liability or contract works policy
• asbestos, terrorism, war, fraud by the owner, damage by vermin, termites or other insects

The notification trap and the owner-builder gap

A claim is refused unless the owner notifies the insurer in writing within 180 days of becoming aware, or of when they might reasonably be expected to have become aware, of the trigger event. Owners who spend a year chasing a liquidator before picking up the phone have often already lost.

Section 137B of the Building Act 1993 (Vic) makes it an offence for an owner-builder to sell within six years and six months of completion without a defects inspection report no more than six months old and, for work over $16,000, domestic building insurance for the buyer. Check the section 32 statement for both.