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Business Insurance Builder's Risk Insurance

Protect your construction project with builder's risk insurance

Are you protected with builder's risk insurance in Ontario? Protecting your home with insurance is just as important when it’s under construction. Builders, construction companies and homeowners are all exposed to risk when engaging in renovations and building projects. So, having this type of insurance when renovating your home or commercial space or even building your dream house is essential.

The further you get into a build, the greater the cost, effort, and resources used. There is more to lose if something goes wrong. This is where builder's risk insurance can help.

Are you renovating, working on a new build, remodeling, or modifying an existing structure? Our experts will ensure you have the coverage you need to protect your financial interests. Most policies do not cover buildings under repair – builder's risk insurance fills this gap.

Top things to know about builder’s risk insurance

  • Builders risk insurance is for properties under construction
  • Policies can be purchased by the home or property owner, contractor, construction companies or developers
  • Builder’s risk is not mandatory, but it's highly recommended to protect your building project

What is builder's risk insurance?

Builder's risk insurance, also known as a course of construction policy, is a type of commercial property insurance. It covers workers and property owners during the building or renovation process. It applies to buildings and locations undergoing work.

Policies protect builders and workers against common perils when working on renovations, remodels, or construction. It protects equipment used, materials, structures, and labour against perils. They include fire, vandalism, and theft once the work has started.

When is builders risk insurance required?

Builder’s risk insurance applies to all types of major construction projects. They include:

  • New home construction
  • New commercial or industrial build construction
  • Major renovation to existing residential or commercial buildings
  • Building a second story or addition
  • If local or regional by-laws require it

Why do I need builder's risk insurance?

Unexpected issues can arise on job sites. Unexpected damage and delays can increase budgets and put a big financial strain on all parties involved. For example, a supplier is out of stock on drywall, or your window manufacturer is experiencing production delays. Or, a storm damages your structure, forcing you to rebuild a portion of it. All these situations cost money and could put your project over budget.

Most commercial and home insurance policies exclude properties under construction. Without this insurance, you would have to absorb the additional project expenses, including property damage, delays, and other issues.

You may need builders' risk because you have to purchase it to show proof of protection. For some, you require it to comply with local or regional bylaws.

What does builder's all risk insurance cover?

It protects you from all threats that could damage your property under construction. It also covers the cost of repairing or replacing materials. Perils not covered are listed explicitly as exclusions.

Here’s a list of the most common perils included:

  • Property damage (causes of damage covered may vary by insurer)
  • Theft and vandalism
  • Fire and smoke damage
  • Project interruption
  • Supply delays
  • Materials while being stored at another location or in transit to the job site
  • Landscaping on the property
  • Temporary buildings, structures, scaffolding, and infrastructure used during the project

What does builder's risk insurance not cover?

Builder's risk insurance does not apply to construction projects before they start or after the work is complete. Plans only cover losses that happen while the work is in progress.

There are specific perils that are commonly excluded. You can get an add-on or separate policy. Common exclusions are:

  • Earthquakes and water damage
  • Employee theft
  • War and government action
  • Contract fees and penalties
  • Voluntary parting of the parties involved
  • Government action
  • Mechanical and equipment breakdowns
  • Faulty design
  • Bad planning or faulty materials
  • Other stated exclusions

Who buys builder's risk insurance policies?

The party responsible for builder’s risk insurance is a common question homeowners and builders debate.

Any party involved in the development can purchase a plan. However, the lead tradesperson or the property owner usually buys it. Often, the contactors will add this cost into the project budget. Be sure to agree upon who is responsible for purchasing the policy and get it before starting the project.

Here’s a list of who could buy this type of plan :

  • Contractors
  • Homeowners
  • Construction companies
  • Building owners
  • Developers and builder's
  • Subcontractors

What are the types of builder's risk insurance?

Construction workers moving a large cement block

There are two main options to choose from:

  • For Workers : Delays, interruptions and damage to building structures are real threats. Coverage protects labour, equipment, building materials, and covers project interruption costs should it get delayed. It applies to skilled trade professionals and others involved.
  • For Homeowners : Insurance does not cover dwellings under construction. If damage were to occur without a builder’s risk plan in place, your claim could get denied. You would be financially responsible. Always notify your insurer of planned renovations. Ensure you have the proper coverage in place. It applies to the landowner. Get more information about home renovations and insurance before starting.

Coverage can also be divided by hard, soft, and financial loss:

  • Hard costs : This covers the structure and all its components. It includes equipment, materials, and fixtures.
  • Soft costs : This is for legal fees and engineering losses.
  • Financial loss : This is for losses that may occur from a loss of use of the dwelling.

How much does builder's risk insurance cost?

Premiums can vary greatly based on the work you are doing. Factors such as project scope, structure size, location, type of work, timeline, and threats are a consideration. The cost is also based on the type of services you offer. The overall cost, building value, development type, and history of your claims are considered.

How is builders risk insurance calculated?

The premium for a builder's risk insurance policy is determined by the total value of your structure upon completion, considering various project-specific factors. This value encompasses the combined cost of all materials and labour used in the construction, excluding the value of the land on which the structure is built.

The average cost of a policy is about 1% to 4% of the total project cost. A $100,000 build would be between $1,000 and $4,000. Buildings with greater exposure to threats will be more expensive to insure.

What is wrap-up liability coverage?

Wrap-up liability is similar to commercial general liability insurance. The difference is wrap-up coverage applies to the specific building project. It covers liability for the property owner and builder.

Does builder’s risk insurance cover liability?

No, builder’s risk is a form of property coverage protecting your building, structures, and materials. It is not liability protection, you’ll need additional protection.

What is the difference between builder’s risk and wrap-up liability insurance?

There is a stark difference between these two types of coverage. Builder’s risk covers the property, and wrap-up is the liability portion of coverage while a property is under construction. Together, they offer a wide range of protection.

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Builder's risk insurance FAQs

You have no legal requirement to have builder’s risk coverage in Ontario. However, it may be required by banks, lenders, and other project stakeholders. It may also be required under the bylaws of some municipalities. It's a good type of protection to add to your Ontario small business insurance if you work on building projects.

A builder's risk insurance estimate can help you determine the coverage you need. Generally, your policy requirements will be 1% to 4% of the total project cost.

The estimate should reflect the completed value of your structure. The value of after the work is complete. Consider all labour costs, materials, and other fees, minus the land value. The best source of this information is your budget. It will give you a good indication of how much you should get.

Like other types of business insurance, there is usually a builders risk deductible. This amount can vary. The higher deductible you select, the lower you’ll pay in premiums.

Hard costs, such as materials, supplies, and labour, are part of builder's risk. However, soft costs can have just as much of a financial impact. They can include accounting, developer costs, real estate taxes, consulting, and additional insurance.

These fees could add up if a loss occurred due to damage or delays. They can have a significant financial impact. Most plans do not cover soft costs outright. But you can add them as an endorsement. What is included will be specified in your policy.

Policies are written for the expected length of the project. They are written for terms of 3, 6, or 12 months. If the work is not completed on time, you can extend it. Usually, one extension is granted.

This is a policy endorsement you can add to your homeowner's policy. It can enhance the warranty on materials, systems, workmanship, and structural defects. Some insurers offer coverage for up to 10 years. Speak with your insurer about your options.

This is a type of builders' risk that allows builders and contractors to insure themselves for all projects they work on over a year rather than insuring each individual project. Once this coverage is in place, you are covered until the policy expires at the end of the year. This saves time on paperwork.

How do you get a builder's risk insurance estimate?

Follow these tips to get an estimate :

  • Get it before the work starts : Get a quote before starting, or you may have issues getting it.
  • Agree on who will get the coverage : Determine who will get the plan (builder, property owner, etc.)
  • Get an estimate of build length and budget : Collect information about the project. This is used to compare quotes.
  • Use a broker : Our commercial insurance brokers will help you compare quotes from multiple insurers.
  • Choose policy : Select the option that is best suited for your project.
  • Get started : Complete the work as planned.

Builder's risk insurance comparison

How is builder's risk different than commercial property insurance?

Builder's risk insurance is a short-term policy only for when your property is under construction. Commercial property insurance covers your location against common perils and loss while you are up and running. You can take out insurance to get protection while work is ongoing.

What's the difference between a builder's risk and a homeowner's policy?

You need insurance when you are doing a renovation. Your home insurance does not cover you when it is under construction. You can take out residential builder's risk insurance to cover your dwelling while work is completed.

three people on a construction site looking down on a blueprint

Protect your project with the best builder's risk insurance

Do you have a building project coming up? Have peace of mind in knowing you have protection with proper insurance. Call 1-855-550-5515 or get started online. We will work with you to find the best solution for your needs.

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