The $340,000 HBCF Limit and the 20% Non-Completion Cap Explained

The overall policy maximum

Current NSW guidance describes HBCF cover of up to $340,000 per dwelling, subject to the policy terms, limits and available balance. This is a maximum across covered losses under the policy, not $340,000 for every defect or each category of expense.

Where one claim contains incomplete work, extensive first-builder defects, investigation, access, reinstatement and related losses, those amounts can compete for the same available cover. Earlier payments or accepted costs may reduce what remains.

The non-completion limitation

NSW policy requirements permit non-completion cover to be limited to an amount not less than 20% of the original contract price. In practical terms, a $500,000 contract may have a non-completion limit of about $100,000 even though the overall policy maximum is higher.

The exact policy and certificate must be checked. The 20% figure should not be treated as a promise that this amount will be paid. The insurer still assesses the covered loss, the work remaining, payments already made and reasonable completion cost.

Why takeover costs can exceed the cap

A replacement builder does not simply continue at the first builder's rates. They must inspect unfamiliar work, establish site control, obtain missing information, manage concealed risks and accept responsibility for a partly completed structure. Existing warranties and subcontractor arrangements may be unavailable. Prices may also have risen since the original contract was signed.

A homeowner who has paid ahead of progress can face an even larger gap. The insurer may assess the contractual work remaining, but the owner may already have paid the failed builder for work or materials that were never delivered.

Defects and incomplete work must be separated

Non-completion and defect rectification are different loss categories. A robust recovery scope should identify what was never performed, what was performed defectively, what deteriorated after cessation and what the owner is changing. This supports the policy assessment and shows whether particular costs fall within the non-completion cap or another part of the cover.

Budget planning should include a realistic contingency for amounts outside cover, disputed items, upgrades, financing and work above the available policy limit. The certificate is a safety net, not a guarantee that every takeover cost will be funded.

Why the excess is not the main financial risk

The current Home Building Regulation permits an insurance excess of no more than $250. On a serious takeover project, that amount is minor compared with the overall policy limit and the way non-completion and defect costs can consume the same available cover.

In takeover project records reviewed by ARK Houses, later investigations produced separate defect-rectification scopes ranging from $172,649 to $217,913.60. Another project recorded $177,647.81 in defect rectification costs, also separate from unfinished work. These figures were costed scopes rather than automatic insurance payments, but they show how quickly concealed defects can use a substantial part of the $340,000 maximum.

Budgeting should therefore consider three numbers independently: the reasonable cost of incomplete contractual work, the reasonable cost of first-builder defect rectification, and the maximum amount still available under the particular policy after any earlier payments or accepted losses.

Practical takeaway: Read the $340,000 maximum together with the non-completion sublimit and the actual policy. The likely construction cost gap should be identified before the replacement contract is signed.

How ARK Houses can help

ARK Houses prepares separated, quantified scopes so the owner can see incomplete work, first-builder defects, investigation, reinstatement and privately funded changes against the available policy limit. We do not decide cover, but we make the construction cost and its basis auditable for the insurer.

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