What NSW Builders Must Know About Mandatory Professional Indemnity Insurance (from 1 July 2026)
From 1 July 2026, registered building practitioners in New South Wales (NSW) will be required to be indemnified under an insurance policy for the work they carry out under the Design and Building Practitioners Act 2020 (the DBP Act). This is a major change for builders, principal builders and other registered building practitioners that affects compliance declarations, tendering and the way you manage risk on every regulated project. NSW Government+1
This guide explains what the law says, what “adequate” PI cover means in practice, how to choose a policy, record-keeping obligations, likely practical cover levels the market is offering, and immediate next steps your business should take to comply.
1. Who is affected?
The DBP Act’s insurance requirements apply to registered building practitioners who provide building compliance declarations for regulated building work — essentially those who sign off on building compliance under the Act. That includes builders who give building compliance declarations for relevant work. The legislation also requires registered design practitioners and registered principal design practitioners to be indemnified for the design work they carry out. NSW Legislation+1
Importantly, the requirement to hold adequate PI insurance was previously subject to transition exemptions. The NSW Government recently extended the exemption window, and registered building practitioners are expected to ensure they are indemnified under an insurance policy from 1 July 2026. Practitioners should watch any further updates from the NSW Building Commission for implementation details. NSW Government+1
2. What does “adequate level of indemnity” actually mean?
The DBP Regulation requires that a policy must, “in the reasonable opinion of the registered building practitioner,” provide an adequate level of indemnity for the liability that could be incurred in the course of the practitioner’s work. The Regulation sets out factors practitioners must take into account when deciding adequacy, including:
the nature and risks associated with the work typically carried out;
the volume of work typically carried out;
the length of time the practitioner has been registered;
a reasonable estimate of claims that could be brought against the practitioner; and
the practitioner’s financial capacity, plus any limits, exclusions or conditions in the policy. NSW Legislation
In short: the DBP Act does not set a one-size-fits-all dollar minimum. Instead, practitioners must document how they reasonably concluded the chosen policy provides adequate cover for their individual risk profile.
3. What documentation and record-keeping is required?
The Regulation also requires practitioners to keep written records explaining how they determined that a policy provided an adequate level of indemnity, keep those records for at least five years, and provide them to the Secretary (the Department) if requested. This is a formal compliance obligation and should be part of every practitioner’s insurance file. NSW Legislation
Tip: keep the insurer’s PDS, your written assessment (with the list of factors considered), your turnover details, examples of typical project values, and any correspondence showing coverage confirmation together in a single folder (digital copy + signed hard copy).
4. Penalties and risks of non-compliance
The DBP Act contains sanctions for providing declarations without being adequately insured. Penalties for various breaches can be significant (the Act sets out penalty units for offences associated with declarations and indemnity obligations). While the exact financial penalty depends on the specific section breached and whether it’s an individual or body corporate, the Act and associated provisions make it clear non-compliance carries material risk. Make compliance a priority. NSW Legislation+1
Aside from statutory penalties, non-compliance also exposes practitioners to direct financial liability: if you provide a compliance declaration and a subsequent defect causes loss, you may be personally liable to rectify or compensate — potentially years after project completion.
5. What kinds of PI policies will meet the test?
Because the DBP framework focuses on “adequacy” rather than a specific dollar threshold, available market products vary. Industry firms and insurers have been developing PI products for the sector; some insurers and brokers are offering specialist packages for registered building practitioners. Industry reporting shows a market range of products with limits sometimes reported between $250,000 and $10 million, typically related to business size and turnover. However, those figures are market examples and not a legal minimum in the Act — your adequacy assessment must support your specific limits. BizCover+1
When comparing policies, check for: retroactive cover period, run-off or extended reporting periods, sub-limits (e.g., per claim vs aggregate), defence costs outside the limit or within the limit, and any exclusions (e.g., defects linked to certain types of work or materials).
6. Practical examples — sizing your cover
Below are illustrative scenarios (not legal advice) to show how “adequacy” will differ depending on risk:
Small residential builder (few projects per year, low turnover): May be able to justify a lower limit if project values are modest and the insurer provides acceptable terms and retroactive cover. Still — document the risk assessment and keep it on file.
Builder undertaking medium-sized multi-unit projects: Likely needs higher limits and broader wording (e.g., $2M–$10M), plus run-off cover for completed projects.
Principal builder delivering large or high-risk residential developments: Should consider the top end of market limits, extended run-off and specialist wording to cover the complexity and potential loss exposures.
Work with a broker experienced in construction PI — they’ll help tailor limits based on project values, claims history and financial capacity.
7. Steps builders should take right now (practical checklist)
Review your registration and the types of compliance declarations you make. Know which work falls under the DBP Act. NSW Legislation
Audit current insurance — gather your current PI policies (if any), check retroactive dates, run-off terms, limits and exclusions.
Prepare an adequacy assessment — write a short report showing how you determined the cover is adequate for your work (nature, volume, turnover, likely claims). Store this for five years. NSW Legislation
Talk to specialist construction PI brokers and insurers — get quotes and compare policy wordings, not just price. Industry products are emerging but differ by insurer. BizCover
Consider run-off and extended reporting periods — these protect you for claims that emerge after a project completes.
Update your risk management & contract templates — ensure you’re not inadvertently accepting risks your insurer won’t cover.
If in doubt, get written confirmation from your insurer that the policy wording provides cover for the DBP obligations you sign off on.
8. How Design Cover can help
If you work across borders — for example NSW projects while based elsewhere — or you act as a principal builder on regulated works, the PI requirement changes how you approach tendering, contracting and insurance procurement. Design Cover can:
Review your current PI policy wording and confirm likely adequacy;
Prepare a simple written adequacy assessment template you can adopt;
Introduce you to specialist brokers and PI insurers for competitive quotes;
Help set up record keeping so you meet the DBP Regulation’s five-year requirement.
Contact us for a tailored review — better to be prepared well before 1 July 2026.
Final words
The DBP Act’s PI insurance requirements are a material shift toward stronger consumer protection and clearer accountability in NSW building work. It places the onus on practitioners to think carefully about the scale and nature of their liability and to document the steps they took when selecting cover. That transparency is good for the market — but it also means builders must act now to secure appropriate cover and the records that prove it.
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