'First resort' insurance scheme for Victoria? More like smoke & mirrors

You heard the announcement. The Victorian government’s brand new Building Legislation Amendment (Buyer Protections) Bill 2025 is here to save the day. Right? Well, I’m calling boloney.

Let’s break down what’s proposed:

• DBI insurance is getting a makeover — moving from multiple insurers to just one: VMIA. That’s right, we’re creating a monopoly for Domestic Building Insurance in Victoria.

• At the same time introducing Rectification Orders — legally binding directives that force builders to come back and fix the mess they left behind.

Sounds great on paper, doesn’t it?

But here’s the kicker…

If builders are now being forced to return and fix defects, why the heck do we even need “first resort” insurance?

Now, if you’re thinking:

“But wait, this sounds like a good thing… right?”

Sure. For the good guys — the honest, financially stable builders who actually want to do the right thing — this may work just fine.

But let’s be real… those aren’t the builders causing all the problems.

What about the dodgy builders?

• What makes us think their fixes won’t be as dodgy as their builds?
• And who’s overseeing the quality of these fixes?
• Who’s drawing the scope of works?
• And how long will this whole process take?

Spoiler alert: probably a long time.

Right now, dealing with building defects in Victoria is super slow. VCAT cases are easily 3+ years to get to trial — and that’s fast.

And now, under this new system, your builder might be legally forced to come back and fix your house. But what if they don’t do it properly? What about delays?

Here’s where things get murky in insurance

Most Home Insurance policies (not DBI) have defect exclusions.

They exclude cover for something like:

“any loss or damage arising directly or indirectly or in any way attributable to defects, structural faults, faulty design or other workmanship faults that you knew of or should reasonably have known.”

So if your Rectification Order doesn’t go to plan, the defect is ongoing or delay there’s a chance your insurance won’t cover you.

Oh, and if you didn’t disclose everything perfectly? The insurer could say you breached your duty of disclosure and — deny the claim altogether. You can’t say you didn’t know…

So, while you wait for a fix that may or may not happen, your insurance quietly won’t protect you the way you think it will.

Instead of relying on this “first resort” Why not have VMIA to actually step up and cover properties with Rectification Orders until properly completed.

Because if private insurers won’t take the risk, someone has to.

It’s time for real consumer protection — not nice-sounding headlines.

This article is a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Tagged as:

• property disputes
• regulatory compliance