As the days get brighter and the snow begins to melt, many homeowners turn their attention to long‑planned renovations or new construction projects.
Before any work begins, take the time to review the insurance you’ll need to stay protected throughout the project.
What Homeowners Should Know
Standard property insurance policies are designed for occupied properties. If renovations or construction is planned, homeowners should notify their insurer, as coverage terms may change and additional insurance, such as a builder’s risk policy, may be required to maintain adequate coverage in the event of loses related to the renovations.
A builder’s risk policy – also known as a course of construction policy – provides coverage while the property is being built or renovated. It protects against loss or damage to the structure itself, along with loss or damage to building materials and supplies used in the project.
In commercial property projects (for businesses or apartment buildings as an example), a builder’s risk policy may be extended to cover “soft costs” such as architectural fees, permit costs, financing expenses, or additional professional fees incurred when construction is delayed by an insured loss.
What Homeowners Should know about Contractors Insurance
Most contractors have a commercial general liability (CGL) policy, which protects them against claims, including for bodily injury or damage to someone else’s property during business operations.
However, CGL policies generally do not cover damage to the construction project itself, as they are designed to provide liability protection to the contractor rather than property damage coverage. Homeowners should be aware of this purpose, and know that the gap can be addressed by the homeowner securing builder’s risk insurance for the specific project or by working with an insurance representative to arrange a comprehensive builder’s risk policy.
The homeowner ultimately pays for builder’s risk coverage, but it can be arranged in two ways. The homeowner can purchase a policy directly through their broker, or the contractor can secure coverage and include the cost as a line item in their project quote. For larger projects or those with greater fire or wind exposure, it’s worth asking the contractor for a quote as their track record on similar projects may help secure a more competitive premium.
What’s Not Covered Under a Builder’s Risk Policy?
Like standard property policies, builder’s risk policies may also contain exclusions specific to construction projects. For example, the cost of repairing faulty workmanship itself is typically excluded, although resulting damage to insured property may still be covered. It is important to talk to your insurance representative to confirm what type of coverage is available in the event of an insured loss.
These policies may also contain conditions or exclusions for certain situations, such as extended vacancy or unoccupied buildings during construction. Reviewing these exclusions early can help avoid surprises later. Ask your insurance representative for the full exclusions section of the policy.
Protect Your Investment and Your Peace of Mind
Renovations and new builds can move quickly, and insurance details can be overlooked. Providing full and accurate information to your insurance representative, and staying in close contact throughout the project, helps ensure you’re properly protected from planning to the final walkthrough.
Insurance works best when everyone understands their role. By staying informed about your responsibilities and the coverage options available and when each would respond – like builder’s risk and CGL policies – you can safeguard your project, your property and your peace of mind.
If you have general insurance questions, our Consumer Information Centre (CIC) is here to help. Explore our Insurance 101 and After Disaster Strikes playlists on YouTube for quick, easy-to-understand guidance from Eddy and our team of insurance experts.
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