Professional Indemnity Insurance for NSW Builders: New 2027 Requirements Explained

Insurance changes are coming for NSW builders.

From 1 July 2027, registered building practitioners in NSW will need Professional Indemnity insurance under the Design and Building Practitioners Act 2020.

Originally set to start in 2024 , this requirement has now been pushed back three times to allow industries more time to prepare for the changes. However, builders may want to consider getting covered now to stay ahead of this requirement and cover key occupational risks they are likely already facing.

What is Professional Indemnity insurance?

If you provide clients with professional advice or services, Professional Indemnity insurance can cover legal fees and losses caused by errors or omissions in your work, real or alleged negligence, breaches of professional duty, and more.

It’s different from Public Liability, a type of insurance that is commonly required to receive some trades licences, get on-site, or work as a contractor. So, if you already have Public Liability insurance, you will still need a Professional Indemnity policy to meet this new requirement.

How can Professional Indemnity insurance protect builders?

For building practitioners, Professional Indemnity insurance can cover key work activities and risks, such as*:

Lodging building compliance declarations

A policy may cover financial losses caused by professional services, including:

• Delay costs
• Property value decreases caused by certain non-rectifiable defects
• Increased operating costs for buildings

Alleged breach of professional duty

Breach of duty claims can arise from many actions, such as failing to obtain necessary approvals or permits, failing to complete work on time, or failing to exercise reasonable care and skill when providing services.

Loss of or damage to documents

Claims can occur when documents in your care, custody, or control are lost or damaged.

Legal representation and defence costs

A policy may pay some investigation costs and legal fees to help defend your business.

What’s not covered?

Professional Indemnity for building practitioners has exclusions, events or activities that are not covered. These may include*:

• Any provision of design or engineering services, or responsibility for them
• Costs to rectify, repair, replace, complete, or remediate any building work or element
• Costs to rectify, repair, or remediate defective building work
• Property development
• Breach of warranty arising from property development
• Building certification or verification of design compliance

Your policy wording will provide details on what is covered and a complete list of exclusions.

How much Professional Indemnity insurance do NSW builders need?

NSW builders will need an “adequate level of indemnity” insurance. This is set out in the Design and Building Practitioners Regulation 2021, which provides the rules needed to enforce the 2020 Act.

Thankfully, the Regulation gives builders guidance on what “adequate” insurance means. Building practitioners must consider certain factors when deciding how much cover they may need:

• The nature and risks associated with the work they typically do
• The volume of work they typically do
• The length of time they have been registered as a building practitioner
• A “reasonable estimate” of potential claims that could be brought against them
• Their financial capacity
• Any limits, exclusions, terms, or conditions on their policy

Building practitioners will also be required to keep records explaining how they determined that they have enough Professional Indemnity cover. These records must be kept for at least five years, and you may be asked to provide them if asked to do so.

What about run-off cover?

Run-off cover may also be mandatory for registered building practitioners. The 2020 Act requires that builders meet duty of care requirements, which typically last long after work is finished.

Professional Indemnity is a ‘claims-made’ policy, meaning claims are only covered while the policy is active. However, issues with a build may only be discovered weeks, months, or even years beyond a project’s completion.

Run-off cover helps builders continue to protect themselves after they have ceased trading, sold their business, or retired. This cover allows you to make claims for a set period (usually seven years) after you have closed or sold your business.

How to decide if you have enough cover to meet your insurance requirements

Building practitioners may want to ask themselves some questions to help choose cover that protects their businesses and meets legal requirements:

• How long have you worked as a registered building practitioner? What types of qualifications do you hold?
• What is your annual turnover? What is the value of typical projects you undertake?
• How much would a ‘worst-case scenario’ claim cost?
• How much money do you have in savings? How prepared are you to cover unexpected losses or a claim?
• What is and isn’t covered by your current Professional Indemnity policy, or the policies you are considering?

Answering the above questions can be part of the written records you must keep that show how you decided what adequate indemnity insurance means for your business. They can complement other paperwork, like your Professional Indemnity policy documents, project value examples, turnover details, and claim details.

What happens if I don’t have enough cover?

Registered building practitioners may be fined if they do not meet the insurance requirement, including having inadequate cover. Work may also be suspended until proof of insurance is provided.

Not having enough cover also leaves your business at risk financially. Underinsurance—not having enough insurance to cover a loss—means you could be left out of pocket for legal fees and compensation if a claim is made against you. This can be potentially devastating for a building practitioner, where project costs can easily total in the hundreds of thousands or millions of dollars.

Protect your business today

While registered building practitioners have another year to meet NSW’s Professional Indemnity requirements, getting covered sooner may be a wise move.

BizCover offers Professional Indemnity built for builders, with cover levels from $250,000 to $10 million. Builders can easily get a quote and buy online in minutes or over the phone and be covered instantly. Policy documents are sent directly to their inbox for easy record keeping.

Compare quotes today and be covered ahead of the 1 July 2027 deadline.

*Information current as of 17 June 2026. General in nature and subject to change. See policy wording for details or contact BizCover.