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Builders Risk Insurance vs. General Liability: What’s the Difference?

Whether you work in the construction industry or are in the process of completing a project on your building, it’s essential to know which insurance policies you need. The two main types of insurance coverage typically required for these projects are builder’s risk insurance and construction general liability insurance. 

While these two policies are similar, you should understand where the differences are and what types of scenarios each one covers before starting. 

Having both policies in place before starting a new – or existing – construction project means you and the individuals involved in the process are protected.

The following guide outlines the fundamental differences between builder’s risk insurance and general liability insurance and why they are necessary for your next project.

Builder’s Risk Insurance

What is Builder’s Risk Insurance?

When it comes to construction, you must first consider protecting the individuals involved – which is essential. However, another factor that shouldn’t go overlooked is the building itself. With builder’s risk insurance in Ontario, your project receives specialized property insurance that protects any building under construction.

Now, you may be wondering how this differs from homeowner’s insurance. Homeowner’s insurance is designed to provide coverage for any building that has already been completed. Builder’s risk insurance in Ontario, on the other hand, protects explicitly any building undergoing new construction, renovation or additions. 

This level of protection is essential because a property under construction can be susceptible to different – often more expensive – risks than the average established structure. A building under construction is also more likely to be vandalized.

What is Covered by Builder’s Risk Insurance? 

Most builders’ risk insurance policies typically cover the cost of lost or damaged business materials directly associated with the construction site. These may include: 

  • Wiring

  • Machinery

  • Fixtures

  • Temporary Structures

  • Lumber

  • Valuable papers and data

In addition to the physical materials on a construction site, builder’s risk insurance in Ontario will also help cover damages that are caused by:

  • Fire or explosion

  • Lightning strikes

  • Hail

  • External theft

  • Vandalism

  • Vehicles or aircraft crashing into the structure

Primary builder’s risk insurance in Ontario covers a wide range of situations. These policies aim to help protect the building under construction and the different materials, fixtures and equipment used. 

That said, there are several other aspects that builder’s risk insurance in Ontario does not typically cover. These include:

  • Employee theft

  • Bodily damage

  • Collapses

  • Government activities

  • Flooding

  • Earthquakes

  • Hurricanes

  • War

  • Weather-related damage to property left unprotected in the open

  • Faulty design, planning, materials or workmanship

  • Contractual penalties or voluntary partings

How Much Does Builder’s Risk Insurance Cost?

Whenever you’re looking for a quote about builder’s risk insurance in Ontario, there are a few different factors an insurance provider will need to know before they can proceed. Be prepared to discuss the following aspects of your construction project:

  • Scope of project

  • Building location, size and value

  • Expected timeline

  • Contractor(s) involved

  • Your claims history

You should also be able to outline the construction budget, as this is often used to help determine what the insurance limit should be on your policy. 

The overall cost, level of coverage and timeline for your builder’s risk insurance in Ontario will vary depending on the project’s exact specifications. 

General Liability Insurance

What is General Liability Insurance?

Often considered a less extensive insurance coverage, a contractor’s general liability coverage protects contractors and their employers from incidents during normal business operations. 

In most cases, general liability insurance is required by law before a contractor may begin working on a construction project. 

What is Covered by General Liability Insurance?

Remember that general liability insurance is designed to cover risks involving bodily injuries and/or property damage. Protecting against any possible accidents and the liability that can follow them, these insurance policies typically include coverage for:

  • Damage 

  • Fire

  • Explosion

  • Underground work

  • Collapse

To be covered by this policy type, incidents must be directly connected to the insured’s project. The primary purpose of general liability insurance is to protect individuals accused of causing injury or property damage and negligence while working on the construction site.

In these situations, general liability insurance can help you with the legal fees to keep your business operational. 

In addition to the above coverage scenarios, your policy may also provide coverage if:

  • Someone is injured on your property

  • You are renting commercial space that becomes damaged

  • You or your employees cause injury or property damage

However, general liability insurance typically does not cover the following:

  • Intentional injuries and/or damage

  • Errors and omissions

  • Lawsuits involving claims that don’t involve bodily injury, property damage, personal injury and false advertising

Overall, general liability insurance is meant to provide extended coverage during each stage of your construction project.

What is the Difference Between Builder’s Risk Insurance and General Liability Insurance

1. Who Purchases Builder’s Risk Insurance

Builder’s Risk Insurance

Responsibility for acquiring builder’s risk insurance falls on the individual who owns the project and the dwelling being built and/or renovated.

General Liability Insurance

Individual contractors must obtain their general liability insurance and ensure the level of coverage aligns with their specific needs.

2. Policy Term

Builder’s Risk Insurance

The length of coverage provided by the builder’s risk insurance is only in effect while the building undergoes construction. Once the project ends, the insurance policy is no longer needed.

General Liability Insurance

It is recommended – and sometimes legally required – for contractors to hold general liability insurance year-round. This mainly applies to individuals who are actively operating a construction business.

3. Who or What is Protected

Builder’s Risk Insurance

This type of insurance policy explicitly protects the construction site itself against any damages, as listed above.

General Liability Insurance

General liability insurance helps cover individual contractors and their employees working on an active construction site or operating a business. 

Wondering How to Get the Right Policy?

To book a consultation with one of our insurance experts at James Campbell Insurance, call us at 1-833-459-1065 or email us at [email protected].