What is builder's insurance? 2023

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Occupancy coverage
Frost/freezing
Debris removal
Best builder's risk insurance in Canada. Covers all essential risks and a lot of optional coverages are available. Highly recommended.Learn more
Victor Insurance Frost/freezing
Property damage
Occupancy coverage
Interesting coverage options for construction companies. A lot of additional options are available.At source

60% of Canadians are planning to renovate or add extensions to their homes in the next two years. In many ways, this is a less stressful process than buying a new place because you can work to your own schedule and are not reliant on other buyers and sellers.

However, there are still many elements that will be outside your control and the best way to preempt any problems is to have adequate insurance to cover you. This guide will introduce you to builder's risk insurance and explain how much it costs and what protection it offers.

What is builder’s insurance?

Builder's risk insurance is a type of commercial property insurance that offers protection in case of problems encountered during a construction project. Say a clumsy worker hits a water main while digging out your new basement or a piece of scaffolding falls and damages a neighbour's car. Builder's risk insurance will have you covered.

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Who buys builder’s risk insurance?

Builder's risk insurance can be purchased by either the property owner or the firm taking on the construction work.

Builder’s risk insurance for homeowners

Your existing home insurance will not cover risks encountered during construction and without home builder insurance you would be liable for any costs.

Builder’s risk insurance for workers

Workers may choose to have builder's risk insurance to protect expensive equipment, building materials or loss of earnings due to unexpected and unavoidable delays.

How much does builder’s risk insurance cost in Canada?

Builder's risk insurance can vary in cost but typically it will cost between 1% and 4% of the total construction cost.

For example, a construction project of $50,000, would cost between $500 and $2,000. Building projects that are exposed to greater risks will typically cost more in premiums.

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What does builder’s risk insurance cover?

Builder's risk insurance covers "soft" costs, "hard" costs and financial loss. Let's break them down:

Soft costs

Soft costs are the costs pertaining to labour expenses that might accrue due to miscalculations or to a project overrunning:

  • Legal fees
  • architect fees
  • local government fines
  • expenses from delays

Hard costs

Hard costs are the costs pertaining to physical equipment, material, structures and fixtures.

  • Scaffolding accidents
  • building equipment damage
  • electrics and plumbing damage

If costs are incurred due to "common perils" then the damages will be covered by your builder's risk insurance.

Good to know

"Common perils" include vandalism, theft, and fire. Always check your specific policy for exclusion. For more info see our more general guide to buying insurance.

Financial loss

Financial loss could occur if a delayed project prevents you from earning money due to the inability to use the property. This is more relevant to commercial property owners than homeowners.

What does builder’s insurance not cover?

Builder's risk insurance tends to exclude certain things from their policies. By and large, these correspond to the so-called 'acts of god' that are generally excluded from all insurance coverage. This includes:

  • War
  • Earthquake
  • Flood
  • Tornadoes

There are also some less cinematic risks that builder's risk insurance tends to exclude:

  • Employee theft
  • contracts terminated voluntarily by both parties
  • fees and penalties incurred by contract-breaking
  • government interceding to block work

Watch out!

Always read an insurance contract closely and pay particular attention to exclusions.

Is builder’s risk insurance worth it?

For most Canadians, their home is their most important asset, as well as the place they spend the majority of their time. Of course, it is important to protect it! If you have already budgeted carefully for a renovation or a home improvement, you definitely don't want to start paying perhaps unlimited amounts if something goes wrong, let alone the stress that would be added on to an already disruptive period.

Builder's risk insurance is an affordable and sensible add-on that will protect if the worst should happen: if your contractor proves to be unreliable or if an accident should damage your or your neighbours' property.

How to buy builder’s risk insurance?

The first step is to decide who will be paying for the builder's risk policy: the contractor or the property owner. Once this is established you will want to shop around for a policy provider. Here are some of the most popular providers in Canada:

  • Aviva
  • BFL
  • Liberty Mutual
  • Travelers
  • Victor

Once you have contacted an insurance company you will be asked to send them certain documents. The typical documents requested are as follows:

Submissions

  • a completed builder's risk insurance application
  • an assessment by a geotechnical engineer
  • a site plan
  • projection of expenses
  • full details of the building in its current state

To find a personalized quote specific to your situation use our guide to buying business insurance.

How to find the best builder’s risk insurance?

The way to find the best builder's risk insurance is to get as many quotes as possible and to be totally honest when making submissions. If you, accidentally or intentionally, omit some information when signing the contract you may find yourself in difficulty if you have to make a claim.

Secondly, you will want to read the contract extremely carefully and make sure that there are no exclusions you haven't noticed. No one wants the nasty surprise of finding out they are not covered for something that they thought was protected!

If you do not find coverage that you believe is comprehensive enough, you may be able to add on extra protection for further costs. You may want to consider buying additional policies that specifically cover "soft" costs if you are worried about work taking longer than scheduled.

You may want a policy that focuses more on crime and arson if your property is in a neighbourhood that has a reputation for high levels of criminal activity.

For example, builders risk insurance in Ontario might focus more on crime and builder's risk insurance in Nova Scotia might be weighted more to environmental damage.

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