Recent changes to indemnity insurance in South Australia are giving homeowners and property investors greater peace of mind when building or renovating. Following a wave of builder insolvencies and rising construction costs, the state government has updated the rules to better protect consumers from being left out of pocket if things go wrong.
If you’re planning a project in SA, whether a new build or a renovation, here’s what you need to know about the updated insurance scheme, why it’s changing, and how it affects your next steps.
What is building indemnity insurance?
Building indemnity insurance is a mandatory policy that builders in South Australia must take out on behalf of their clients for most residential construction projects over a certain value. This insurance acts as a safety net, protecting you if your builder can’t complete the work due to death, disappearance, or insolvency.
In other words, if your builder vanishes or goes bust halfway through the job, you can claim on this insurance to help finish the project or fix major defects.
Key points to remember:
- It’s required for residential work over $12,000 (soon changing to $20,000)
- The policy is taken out by the builder, but for the benefit of the homeowner
- The coverage is capped, meaning there’s a limit to how much you can claim
Until now, that cap was $150,000, but times have changed.
Key changes to indemnity insurance South Australia
In July 2025, the South Australian government announced significant reforms to the indemnity insurance scheme, the first major update since 2013. These changes aim to reflect the realities of today’s construction market and offer stronger consumer protection.
Here’s what’s changing:
✅ Payout cap increased to $250,000
From 1 October 2025, new policies will cover up to $250,000 per claim, this is a 66% increase from the previous $150,000 cap. This gives homeowners far more financial protection if their builder defaults.
✅ Premiums rising slightly
To support the increased coverage, insurance premiums will increase by around 0.1% of the total build cost. For a $500,000 build, that’s approximately an extra $500–600, this is usually included in your builder’s quote.
✅ Threshold raised to $20,000
From mid-November 2025, indemnity insurance will only be required for residential projects valued over $20,000 (up from the current $12,000 threshold). Smaller jobs won’t need this insurance, easing costs for minor renovations.
✅ Consistent coverage across insurers
All approved insurers will be required to offer the same $250k minimum cover, ensuring consistent protection no matter who you or your builder chooses.
For more details on the policy requirements, you can visit the SA Government Consumer and Business Services page.
Why these changes were introduced
The reforms are a direct response to the challenges facing SA’s construction sector. In recent years, the state has seen a spike in builder collapses, leaving many homeowners with half-built houses and limited recourse.
Key reasons behind the overhaul:
- Record insolvencies: Builders like Qattro Built and Felmeri Group went under, leaving hundreds of projects unfinished
- Rising construction costs: The old $150k cap no longer covered what it takes to complete a modern home
- Increased claims: The government paid out over $18.7 million in claims in 2023–24 alone
- Consumer protection gap: Too many families were being left financially exposed despite having insurance
These updates are designed to restore confidence in the industry and make sure the safety net actually works in today’s environment.
How the new indemnity insurance affects you
If you’re planning a new build or major renovation after October 2025, here’s what the changes mean in practice:
🔹 More protection
You’ll now be covered up to $250,000, a significant improvement that better aligns with today’s building costs. If your builder fails partway through, this gives you a greater chance of completing the work without large out-of-pocket costs.
🔹 Slightly higher cost
The insurance premium (paid by your builder, but usually embedded in your contract price) will increase. For most homeowners, this means an extra few hundred dollars, but in return you gain an extra $100,000 in coverage.
🔹 Threshold awareness
If your job is under $20,000, indemnity insurance will no longer be required after mid-November. But if your contract is signed before then, the old $12k threshold still applies, so be clear on your timeline and check whether coverage is needed.
🔹 Certificate check
Always ask your builder for a Certificate of Building Indemnity Insurance. This proves your project is covered. Keep it on file, you’ll need it if anything goes wrong.🔹 Developers and investors
For investors, this means better protection across multiple builds, but also a need to track which contracts fall above or below the new threshold. Minor jobs may fall outside the scheme post-November, so proceed with extra care on those.
Practical tips to stay protected
While stronger insurance is a positive step, it’s still just a backup plan. Here’s how to reduce your risk upfront:
- Choose reputable builders: Check licenses, reviews, and past projects
- Review contracts carefully: Don’t rush into agreements
- Understand the rules: Know whether your build requires insurance, and if so, confirm the $250k cover is in place
- Ask for proof: Never assume coverage, always request the certificate
Insurance only activates if your builder dies, disappears, or becomes insolvent. It won’t cover poor workmanship or delays, so doing your homework remains essential.
These changes to indemnity insurance in South Australia are a timely and necessary step toward restoring confidence in the building and renovation process. With more coverage, updated thresholds, and better alignment with modern construction costs, the reforms aim to reduce the financial risk for homeowners and investors alike.
While no insurance can prevent builder insolvencies, these reforms ensure that if the unexpected happens, you’re not left bearing the full cost. As always, staying informed, understanding your obligations, and choosing the right builder are key steps to a smoother project.
For anyone building or renovating in SA, these updates are worth noting, not just as a policy change, but as a sign that the system is evolving to better protect your biggest asset.