10-Year Damage Insurance for Apartment Buildings

10-year liability insurance is a new insurance product in Australia that allows owners to have serious damage repaired within ten years after an apartment building was first occupied.

Important information

Ten-year damage insurance (DLI) is being proposed as a type of insurance to cover any potential costs of repairing serious damage to a critical building component for up to 10 years.

This insurance is intended to provide a first line maintenance cover allowing building owners to make a claim as soon as a fault is discovered.

The DLI policy will cover significant parts of the building’s common assets, including the building’s structure, fire safety systems and waterproofing for up to 10 years.

If adopted in New South Wales, DLI will be given by the developer or builder before a building is occupied. A policy attached to the building means that the policy will cover successive owners making claims during that ten year period.

The Ministerial Advisory Committee produced a report in August 2022 on the viability of long-term casualty insurance in New South Wales. We will consult widely on the report’s recommendations while continuing to work with industry to support the DLI market.

Things you need to know

When will long-term damage insurance apply?

The NSW Government is currently working with the insurance and construction industries to identify ways to support a competitive and affordable casualty insurance market. There is already a supplier in the market and we are working to support new entrants to the market.

A regulatory impact statement is being prepared for consultation on the proposal to make long-term damage insurance mandatory instead of stratigraphy bonds after a transition period.

Developers can seek approval from the NSW Secretary of Customer Services to purchase damage insurance instead of paying for the Strata Building Bonds and Inspections Scheme (SBBIS).

How effective will permanent damage insurance be for people living in apartment complexes?

Currently, apartment owners are covered by the Strata Building Inspection and Bonding Scheme (SBBIS). Under the proposed DLI plan, a developer would purchase long-term damage insurance, which provides people living in residential apartment buildings with comprehensive protection against building damage caused by substandard design and construction. It ensures that building owners can rectify those defects without delay. This is because the cost of repairing such damage will be covered by the insurance policy if a builder or developer is unable or unwilling to repair the defects, even if the developer becomes insolvent.

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