What is builder’s risk insurance?
Property insurance, whether it be for a house, condo building or warehouse, is meant to protect the building after it is completed. However, most home and business insurance policies don’t protect a building while it’s under construction or renovations. Builder’s risk insurance fills this gap, and provides coverage for a home or building, along with construction materials, while work is underway.
Who needs builder’s risk coverage?
Essential for any new construction project, and for major renovations that involve structural changes to a building, you might need builder’s risk insurance if you’re a:
Developer or builder
If your firm is erecting homes or other structures, you need a builder’s risk policy to cover these buildings while they are under construction.
If you’re overseeing a renovation that includes structural changes to a building, or with a total cost over $100,000, builder’s risk coverage is a necessity.
Homeowner or entrepreneur
If you’re acting as your own general contractor to build your dream house, or if you’re a home or business owner doing major renos, you or your contractor need builder’s risk.
Builder’s risk insurance will help protect your investment, and provide coverage for:
Liability insurance is also typically included in the policy to provide additional protection for contractors and property owners if third parties are hurt on the job site. (Note that in Ontario, worker injuries are covered under WSIB.)
Should there be a loss that is covered under the policy, your builder’s risk insurance will typically provide coverage for:
- The cost of debris removal
- The value of damaged building materials
- Material and labour costs to repair damage to the property
- Costs such as engineering, architectural and/or legal fees if they are in addition to what was called for in the original plans
Safeguarding your construction project
Having a builder’s risk policy is only one precaution you can take to protect your construction project from common risks. Your insurance broker can advise you on other steps, including having proper fencing around the worksite to help prevent theft and bystander injuries. Another good idea is keeping the area well-lit at night to deter theft and vandalism. Some of these may also be conditions of your insurance.
Good to know: Common questions about builder’s risk insurance
Who usually buys builder’s risk insurance?
Builder’s risk insurance is usually purchased by a builder or general contractor that is in charge of a new construction or renovation project. In some cases, individuals undertaking a construction or renovation project will buy builder’s risk insurance for the duration of the project, particularly if they are acting as their own general contractor.
Who needs (is required) to have builder’s risk insurance?
Depending on where your construction or renovation project is taking place, it’s very likely that the city or whatever body issues building permits will ask to see proof of a builder’s risk policy. It doesn’t matter who buys the policy, the owner of the building or the contractor doing the work, but both parties typically need to be named in the policy.
What does builder’s risk cover?
A builder’s risk policy typically provides coverage for a lot of the same things that a homeowners policy covers:
- Losses from fire, wind or lightning
- Losses from vandalism or theft. This includes theft of building materials, and also personal items from your home while it is under construction
- Liability coverage can be added to protect the builder/contractor and property owner if non-construction personnel are injured at the worksite
Who offers builder’s risk insurance?
Builder’s risk insurance can be sold either as a personal insurance or business (commercial) insurance policy (it usually depends on the size and type of building project). If your home insurance company doesn’t offer this coverage, you can get this as a separate policy with a different insurer. One of our business insurance experts would be happy to discuss your options with you.
When does builder’s risk insurance end/expire?
Builder’s risk policies are usually sold for a minimum of six months and can be extended depending on the length and complexity of your project. It is important that you ask for your coverage to start before the project commences (e.g. before digging foundations).
How much is builder’s risk insurance?
A builder’s risk policy is priced based on a number of factors, including:
- Replacement value of the building and construction materials
- Complexity of the project
- Location of the project and crime levels in that area
- Past claims experience of the business and/or homeowner
As an example, for a million-dollar home in Toronto (replacement value of $250,000) undergoing an $80,000 renovation, you can expect to pay around $1,000 for a six-month builder’s risk policy.
When should I get a builder’s risk policy?
Although you can get a builder’s risk policy at any time during a construction project, we strongly recommend that you have coverage in place before work begins. It is more challenging getting a policy once the project is underway, and you will have fewer options in terms of insurance companies and coverage.
To find out more about how Builder’s Risk insurance can protect your construction or major renovation project in Ontario, call us at 1-800-731-2228.