Guarantees by the Registered Master Builder Federation can include insurance for payments of up to $30,000 if a master builder does not complete the job, but does not protect home buyers against a franchise house building company going broke.
In recent months, several franchise holders around the country have gone into receivership or liquidation.
Most notably in Otago, it was the franchisees of Signature Homes and Landmark Homes, who between them have more than 15 homes being built in the South.
The almost 20-year-old federation insurance scheme was mandatory for the master builder to take out, but it was voluntary for the homeowner, with charges of $780-$925 for homes whose value exceeded $100,000, federation chief executive Warwick Quinn said.
"It [insurance] can bridge that point where a builder is no longer there, before another one starts. In most cases it is enough to see them through that awkward period. We are not guaranteeing the [franchise] company," Mr Quinn said.
He declined to comment directly on any of the franchise house building companies, saying it was up to each individual franchise on whether it used a master builder or another contractor.
Mr Quinn also declined to comment on the value or number of overall insurance claims, saying the information was the intellectual property of the federation and was not released because of competition in the market.
However, he said insurance claims had not been increasing in number recently, which itself may be influenced by the lower number of building consents being issued.
This year was shaping up to be an "average" year for claims.
The federation's insurance covered four areas of loss.
The first was the home buyer losing the deposit, with a claim not to exceed $20,000.
Second was for non-completion of the job, for a payment up to $30,000.
"Often another builder can be taken on to complete the job for the agreed contract price," he said.
The third level of insurance covered any remedial work required, for up to two years, and did not exceed a $100,000 claim.
The last insurance was for structural defects cover for up to seven years, not exceeding $100,000.
The number of annual claims was generally "evenly split" between the deposit, non-completion and remedial work claims, with the latter fewer in number but greater in value, Mr Quinn said.
He said the federation was "remarkably unaffected" by the leaky homes issue in recent years, the cost of which was this week reported to have leapt from $3.6 billion to $11.5 billion.
The guarantee was not offered to multi-unit apartment projects or high-rise apartments, where there could be "hundreds of apartments" being built, Mr Quinn said.
