Builder's risk insurance & course of construction insurance
Looking to protect your next project with builder's risk insurance? Get a customized course of construction quote and bind your low-rate coverage with us today.
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What is builder's risk insurance?
Matt Hands, VP, Insurance and MoneySense
Builder’s risk insurance (also known as course of construction insurance) is a type of home insurance that covers property while under construction. Whether you’re building a new home or doing major renovations, a builder’s risk insurance policy protects your investment in case something goes wrong. Your policy will cover damage to the building itself and construction materials stored at the site. It’s also very important to keep your usual home insurance provider in the loop on what the renovations or changes are.
Who needs builder's risk insurance?
Builder’s risk insurance is recommended for anyone who owns a residential or commercial property undergoing construction, including major repairs and renovations.
You will likely need builder’s risk insurance if you’re building a new home. For example, you’ll require coverage if you’ve hired a contractor to build a house on your vacant lot. You’ll also want coverage if you’re demolishing an existing home and building a new one in its place.
Another time when you’ll need builder’s risk insurance is if you’re doing major renovations to your existing home. You usually don’t need coverage for common jobs like a kitchen renovation, but larger construction projects, like an addition or garage conversion, will likely require it. If you’re unsure about what type of coverage you’ll need, check with your broker – before construction starts.
Course of construction vs. builder's risk insurance
How does builder's risk insurance work?
A builder’s risk policy is designed to cover your project against a catastrophic loss that occurs during the course of construction. Here's what's typically included in a standard plan, as well as a few types of risks that may require separate coverage.
- Loss or damage to the building – A regular home insurance policy may not cover damage to a building under construction. Builder’s risk insurance ensures you’re covered for common risks that could damage the structure of your project, such as lightning, fire, and wind. You may also be able to claim related expenses, such as legal fees and architectural costs.
- Loss or damage to materials on-site – If your building materials are stolen, damaged or destroyed (e.g. in a fire) on-site, your insurance policy will pay to replace them. With construction projects, you’re more susceptible to risks like theft and vandalism during off-hours, so having the right builder’s risk coverage in place can give you the peace of mind you need.
- Third-party liability (optional) – Most insurance providers allow you to add an optional coverage, called premises liability, on your builder’s risk policy to ensure you’re financially protected in cases of third-party liability. This means that in the event you’re sued for bodily injury or property damage by a third party, your insurance can help cover the various expenses, including legal fees and settlement costs. While this coverage does come as an additional charge, it’s highly recommended – in the event your general contractor’s insurance policy doesn’t respond to the claim, you’ll be held liable as the property owner instead.
How much does builder's risk insurance cost in Ontario?
The cost of a builder’s risk policy can vary greatly as insurers look at individualized factors – such as the project type and the time frame – to determine your premium. Insuring a six-month new build, for example, would likely cost somewhere between $4,000 and $6,000. To find out how much you’ll be paying, be sure to request a builder’s risk quote from us today.
request a quoteWhat factors affect the cost of builder's risk insurance?
The cost of builder’s risk insurance is based on the coverage you need and the probability you’ll make a claim. A few factors that contribute to the cost of coverage include:
Project type & cost
Construction projects that carry more risk (such as a new build home) will cost more to insure. And the bigger your project, the more coverage you’ll need to purchase.
Policy deductible
The deductible is the amount you agree to pay yourself before your insurance policy kicks in. Selecting a higher deductible will lower your premium.
Location
Rebuilding a row house in a dense urban neighbourhood is much riskier than adding a built-in garage to a house in the country. So you can expect your insurance premium to reflect that.
Project length
There’s more opportunity for something to go wrong during a year-long project than one that will only take a few months. The longer you need coverage, the more you will pay.
Insurance history
The more coverages you opt-in for, the more expensive your insurance will be. And of course, higher limits of coverage lead to higher premiums.
Coverage type
The more coverages you opt-in for, the more expensive your insurance will be. And of course, higher limits of coverage lead to higher premiums.
Property type
Insurance tends to be more costly for commercial properties (like if you’re building a mixed-use development) than for residential properties. And higher valued buildings will also cost more to insure.