Builders Risk Insurance in Ontario

Builders risk insurance (also called course of construction insurance) is a specialized policy designed to protect a property while it is being built or undergoing major renovations. It typically provides coverage for the structure and construction materials against risks such as fire, theft, vandalism, and some times certain types of water damage during the construction process.

Builders risk insurance is commonly required for homeowners, investors, and developers who are building a new home or completing major renovations. In many cases, lenders may also require proof of builders risk insurance before construction begins.

Standard homeowners insurance policies are designed for completed and occupied homes. When a property is under construction or undergoing major renovations, the risk profile changes significantly. Because of this, many insurers will either endorse the policy if possible or you may be required to get a different policy for the whole property until the project is completed and the home transitions back to a standard home policy.

A builders risk policy may provide coverage for:

• The structure as its being built.
• Construction materials stored on site
• Materials waiting to be installed
• Damage caused by fire, theft, vandalism, or certain weather events
• Limited liability exposures related to the construction project

Coverage details can vary depending on the insurer and the scope of the project. Each coverage has a specific maximum or limit.

Builders risk insurance is structured very differently than a homeowners policy. For example:

• Liability is usually premises liability, which is more limited than the personal liability found in a homeowners policy.
• Builders risk policies typically do not include contents coverage.
• Additional Living Expenses (ALE) are not covered.
• Coverage is focused primarily on protecting the structure and construction materials, rather than the occupants and their personal belongings.

There are many considerations that property owners must take into account.

Water coverage under builders risk policies is often limited. Many builders risk policies do not cover overland water or surface water flooding. However, some policies may provide coverage for events such as sewer backup or flooding from a nearby body of water, depending on the insurer and policy wording.

Yes. Builders risk policies are typically much stricter than standard homeowners insurance policies. Insurers closely review the scope of construction, who is completing the work, and other factors before offering coverage. Because the risks during construction are higher, underwriting guidelines tend to be more restrictive.

Builders risk policies often include policy warranties, which are specific conditions that must be followed in order for coverage to remain valid. Examples may include requirements related to site security, verifying each contractor has their own insurance policy, requirements and precautions when hot work or work with flame occurs, among others. Failure to comply with these warranties can void coverage during a claim.

Builders risk policies are usually issued for a specific construction period, often between 6 and 12 months. If construction takes longer than expected, the policy may need to be extended until the project is complete. Some companies have limits on how long they will issue a policy for.

Once construction is complete and the property is ready for occupancy, the builders risk policy is typically replaced with a standard homeowners insurance policy or landlord insurance policy, depending on how the property will be used.