From 1 July 2025, all registered building and design practitioners in NSW must hold mandatory professional indemnity (PI) insurance under the Design and Building Practitioners Act 2020 (NSW).
This update, prepared by our building and constructions lawyers, outlines the new requirements, who must comply, potential penalties, and how to prepare.
Key Takeaways
- From 1 July 2025, all registered building and design practitioners in NSW must hold compliant PI insurance, no exceptions.
- “Adequate” coverage means insurance that is tailored to your role, project type, and liability (not just any off-the-shelf policy).
- Without valid PI cover, you risk paying for legal claims and defects out of pocket (up to 10 years after project completion).
- Insurers are limiting cover for retrospective claims and statutory declarations. Don’t assume last year’s policy still works.
- Reviewing your cover now avoids compliance issues, insurer delays, and potential registration disruption in mid-2025.
What is Professional Indemnity Insurance?
PI insurance protects registered practitioners against claims from professional errors, omissions, design defects, or misleading compliance declarations. Unlike general liability, it is tailored for professional services and legal obligations.
Learn more about what is professional indemnity insurance in our guide.
Who Must Hold PI Insurance in NSW?
Under the Design and Building Practitioners Act 2020 (DBP Act) and its Regulations 2021, all registered building practitioners must carry PI cover for professional services, including:
Building/design practitioners
Principal design practitioners
Engineers and project managers involved in regulated design work
This requirement was deferred to 1 July 2025 to allow time for compliant insurance products to be developed.
To understand how the DBP Act applies specifically to architects, read our detailed guide on the Design and Building Practitioners Act for Architects.
Minimum PI Insurance Requirements Under DBP Act (from 1 July 2025)
Ensure your PI policy includes:
Cover adequate to your role, typically AUD 1m to 5m+
Scope including design, certification, inspection, compliance declarations
Run-off cover and retroactive protection
Coverage of declarations under the DBP Act
Policy wording aligned with Clause 75/77 “adequately insured” test
Legislative Framework
| Law or Regulation | Who It Applies To | What It Requires | Why It Matters |
|---|---|---|---|
| Design and Building Practitioners Act 2020 (NSW) | Registered building, design, and engineering professionals | From 1 July 2025, you must have PI insurance that’s “adequate” for your role and services | This is the main law introducing mandatory PI insurance for practitioners working in NSW’s construction industry |
| Design and Building Practitioners Regulation 2021 (NSW) | Same as above | Sets out what “adequate” insurance means (including the level of cover and what risks must be included) | Helps you understand exactly what kind of policy you need to comply with the Act |
| Statutory Duty of Care (under DBP Act) | Anyone doing construction work | You’re legally responsible for avoiding defects (even if there’s no contract) | Clients can sue you up to 10 years later (and PI insurance helps cover this long-term risk) |
| Legal Profession Uniform Law (NSW) | Lawyers and law firms in NSW | Must maintain a minimum $2 million in approved PI cover | Still applies if you’re a lawyer or part of a multi-disciplinary practice |
| Health Practitioner Regulation National Law (NSW) | Doctors, dentists, allied health professionals | Must have “appropriate” PI insurance to remain registered | Without insurance, you can’t legally practise in NSW |
| Corporations Act 2001 (Cth) & ASIC RG 126 | Financial advisers and AFSL holders | Must hold PI insurance that covers all financial services reps | Breaches can lead to ASIC penalties and loss of your AFSL |
Exemptions & Temporary Deferrals
The exemption period has now expired – full compliance required post 1 July 2025.
A limited exemption may apply where no insurance product is available, subject to NSW Secretary approval under Clause 76 of the DBP Regulation.
Consequences of Non-Compliance
Operating without compliant PI cover can trigger:
Regulatory action or suspension of registration
Exposure to costly uninsured claims
Breaches of DBP statutory duty and compliance declarations
Damage to professional reputation and client trust
Don’t leave it to chance – reach out to our building and construction lawyer for guidance today.
Practical Compliance Checklist
The following steps reduce risk and keep your practice compliant:
- Conduct an annual coverage audit at least 30 days before renewal to verify limits, endorsements and run-off arrangements
- Notify insurers promptly of any potential claim or circumstance to avoid late-notification exclusions
- Secure a new PI Policy where required (tailored to DBP Act obligations (from $250 k–$10 m options))
- Document proof of cover, including certificate and policy wording
- Train all staff and contractors on PI scope and obligations
- Review contractual indemnities to ensure they do not exceed policy coverage or trigger exclusions
- Implement documented risk management systems; many insurers offer premium discounts for ISO 9001 accreditation
If you’re unsure about intellectual property rights in construction, learn more in our article on who owns the plans in a building project.
Interaction with Other Professions
These changes specifically target NSW building/design practitioners, but other professionals remain subject to their regulatory PI regimes:
Solicitors: Continue under LPUL (minimum $2m+ cover)
Health practitioners: Regulated by AHPRA (may require cyber liability in future)
AFSL holders: Governed by Corporations Act and ASIC RG 126 compliance
Real-Life Insight from Prosper Law
At Prosper Law, we’ve seen practitioners have PI insurance in place, but the cover limit was far too low for the scale and risk of their work.
Because we flagged this, they were able to increase their coverage in time. Had they not adjusted their policy, they may have faced significant out-of-pocket costs. This highlights the importance of regular legal review – not just having a policy, but having the right one.
Remember: Having the wrong level of cover can be just as costly as having no cover at all.
Frequently Asked Questions
Is PI insurance really mandatory from 1 July 2025?
Yes. The DBP Act mandates “adequate” PI cover for registered practitioners in NSW starting that date.
Do contractors need their own PI insurance if the principal consultant already holds a policy?
Yes, unless the principal’s policy expressly names the contractor as an insured and fully captures the contractor’s scope of work, regulators expect each practitioner to ensure individual coverage.
How long must I maintain run-off cover after retiring?
Regulators, including the Law Society of NSW and AHPRA, generally require a minimum run-off period of seven years, aligning with limitation periods for negligence and contract claims in the Limitation Act 1969 (NSW). .
Can a professional partnership rely on a single PI policy?
Yes, provided the policy names the partnership, all partners and employed practitioners, and meets the relevant minimum terms. Any partner practising outside the partnership needs additional cover.
Are there penalties for late renewal of PI insurance?
Operating without current PI cover, even briefly, constitutes a breach. Regulators may impose fines and can suspend practising certificates until evidence of insurance is supplied.
