Domestic Building Insurance (DBI) is the consumer-protection backstop for Victorian residential building work. Required under the Domestic Building Contracts Act 1995 for all residential building work over $16,000, DBI covers buyers and future owners against builder insolvency, death or disappearance. The cap is $300,000 — about half what many modern builds cost — and the claim process is famously difficult. Buyers of newer properties regularly assume DBI provides comprehensive protection; in practice, gaps are substantial.
This guide covers what DBI does and doesn’t cover, the claim process, and the contract checks for properties built within the DBI coverage period (10 years from completion).
What DBI covers
DBI is “last-resort” insurance — it pays out only if you cannot recover from the builder directly. The covered events are:
- Builder insolvency (liquidation, administration, bankruptcy)
- Builder death
- Builder disappearance (cannot be located after reasonable inquiry)
Coverage is for non-completion of works (during construction) or defects (post-completion). The 10-year coverage runs from the date of completion of the building work.
What DBI does NOT cover
- Defects where the builder is solvent and locatable
- Cosmetic issues
- Wear and tear
- Defects caused by occupant misuse
- Building work done by a different builder
- Owner-builder construction (no DBI required for owner-builders)
- Claims above the $300,000 cap
Claim process — and why it’s difficult
| Step | What happens | Typical time |
|---|---|---|
| 1. Identify defect | Independent inspection | 2–4 weeks |
| 2. Notify builder | Written notice with rectification request | 2–4 weeks |
| 3. VCAT proceedings | If builder won’t rectify | 6–18 months |
| 4. Builder enforcement | VCAT order, if won | 3–6 months |
| 5. DBI claim (if builder insolvent) | Lodge with insurer | 3–9 months |
| Total time to resolution | — | 12–36 months |
The $300,000 cap
The DBI claim cap is $300,000 per dwelling. In a market where single-dwelling builds frequently cost $700,000+, this cap creates substantial gaps:
- Major rectification. Structural defects affecting the whole house can easily exceed $300,000.
- Apartment buildings. Each individual lot has its own $300,000 cap, but common-property defects fall to the OC. Cladding rectification routinely exceeds the per-lot cap.
- Multiple defects. All defects identified within the same claim are aggregated against the $300,000 cap.
What the Section 32 must show
For properties under 10 years old, the Section 32 should disclose:
- Date of construction completion (occupancy permit date)
- Builder details (name, licence number)
- DBI policy number and insurer
- Any current claims under the DBI policy
- Any defects the vendor is aware of
- Building permit and occupancy permit copies
Contract checks for newer properties
- Confirm DBI policy is in place. Original policy document, current insurer.
- Check the builder’s status. ASIC search for insolvency or strike-off proceedings.
- VBA register search. Confirm builder licence is current and check disciplinary history.
- Independent inspection. Building inspector who specialises in defect identification — $800–$1,500 for a thorough report.
- Common defects to check: waterproofing (especially balconies, bathrooms), cladding, structural cracking, roof flashings, drainage, slab heave.
- Apartment-specific checks. OC certificate for building defect bond status, cladding rectification, and any group claims.
Building defect bonds — newer scheme
For high-rise apartment buildings (more than three storeys above ground), the Building Act 1993 amendments introduced a building defect bond — typically 2% of contract value — held in trust for 2 years post-completion. The bond is intended to fund rectification of defects identified during the post-completion period.
Buyer checks for defect-bond properties:
- OC certificate disclosure of bond status
- Whether bond is intact or has been drawn down
- Independent inspection within the bond period
- OC’s record of defect identification and claims
Special conditions
- Vendor warranty about no current DBI claims
- Vendor warranty about builder solvency at contract date
- Vendor disclosure of all defects identified post-completion
- Right to rescind if material undisclosed defects emerge
Ready to check your contract? Upload your Section 32 or Contract of Sale at precontractreview.com for a pre-contract check — typically in just a few minutes.