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Construction Insurance 101: Everything You Need to Know to Protect Your Site

Whether you’re undertaking an extensive home rebuild or a minor commercial renovation, ensuring you have the right insurance is always essential.

Construction insurance protects contractors and property owners in case of an unfortunate circumstance causing loss, destruction, or damage during construction, renovations, or repairs.

To help you determine the type of policy that fits your project, we’ve put together the following guide.

What is construction insurance?

Construction insurance in Ontario — also known as builder’s risk insurance—is a specific type of insurance that is meant to protect your building and liability for the entire duration of the project. This type of insurance policy is typically required by both home and business owners in order to help them avoid expensive property claims in the event something happens.

The reasons why a construction project would require construction insurance may include the following:

  • New commercial build construction
  • New home construction
  • Adding a second story or other additions to the property
  • Any major renovation projects

Why do you need construction insurance coverage?

Construction insurance coverage is specifically designed to provide your project with protection from beginning to end. What this means is that you’ll have coverage from the moment the build starts, all the way up to project completion when the building becomes occupied.

Construction insurance in Ontario covers a wide range of factors, including the building itself, construction materials, and liability in the event of any physical loss or damage caused by an insured event.

Depending on your specific project, construction insurance coverage can be customized to meet your exact needs. This ensures your project has effective coverage throughout every stage of the process.

Some key coverage options you can choose from may be:

  • Property coverage
  • Project interruption costs
  • Pollution and clean-up removal
  • Wrap up liability insurance
  • Completed operations

The Difference Between Property Insurance and Construction Insurance

At first glance, several types of insurance coverage may seem like they are similar or even identical. However, it’s important to understand the differences in order to ensure you receive the necessary coverage for your specific project.

Construction insurance in Ontario is actually a special type of property insurance that is designed to cover buildings under construction, materials, and/or liability in the event of loss or damage due to insured perils like fire, wind, vandalism, explosions, or slip and falls. It is important to have a builder’s risk or construction endorsement on your property insurance policy to ensure coverage throughout the duration of the build. It can also cover theft of materials intended to be used in the construction.

To receive extended coverage beyond the scope of your project, you should consult an insurance expert who can help determine the best policy for your needs.

When does construction insurance end?

This may seem like a confusing aspect of the construction insurance policy given that the general understanding is coverage ends after a project finishes. However, knowing exactly when that is can be unclear.

Construction insurance in Ontario typically ends when one (or more) of the following conditions are met:

  • If the property is occupied or put to its intended use
  • If the policy cancels or expires
  • A covered building or structure is accepted by the purchaser
  • Insurable interest in the covered property ceases
  • Construction is abandoned with no intent to complete it

What is typically not covered by construction insurance?

Generally, construction insurance in Ontario doesn’t cover the following items or situations:

  • Equipment or tools left at the job site: These types of items are usually covered under a contractor’s policy, and therefore aren’t protected under most construction insurance policies.
  • Losses occurring before or after construction begins: As stated before, construction insurance in Ontario provides coverage once the project has started. Anything damaged or lost prior to the beginning of your project or after completion will not be included in the policy.
  • Faulty design: The scope of a construction insurance in Ontario policy does not include loss, damage, or destruction due to negligence or error. This is often covered by liability insurance, which is separate.

What unique situations can construction insurance cover?

  • Buildings or structures under construction: When a building is under construction, it is often more vulnerable to weather-related events, vandalism, and even accidents. Construction insurance in Ontario helps protect buildings that are at higher risk than normal during the construction process.
  • Materials and supplies: One of the more unique risks a construction site faces is exposure. Materials and supplies are often left in temporary structures, in a trailer, in a storage unit, or out in the open. This increases their risk of theft and exposure to the elements.
  • Property in transit: In the event that an automotive accident occurs while transporting building materials or equipment, you want to ensure you have the right construction insurance coverage.
  • Debris removal: Construction of any kind (big or small) is messy. A commonly underestimated risk/cost is the cleanup involved in the event that the building is damaged by an external force such as fire or wind. Construction insurance in Ontario helps protect against such unforeseen situations.
  • Business income and/or rental value: If your project goes beyond the estimated timeline due to construction delays or damage, this may result in the loss of income or other financial benefits. Having these additional coverages on your construction insurance policy allows you to recuperate some—if not all—of these lost costs.

What is the cost of construction insurance?

The exact cost of a construction insurance policy in Ontario will range depending on a few different factors, including the project scale and services being offered. In addition, any premiums you face will be determined based on specific aspects related to the construction business and the actual type of construction work being completed.

Some potential factors include:

  • The location of the business
  • The size of the business
  • Your past insurance claims records
  • The duration of the construction project
  • The types of operations such as demolition, tunneling, drilling, snow removal, or mining

Construction insurance in Ontario has the potential to benefit anyone whose business relies on providing construction services or operations.

These may involve services and operations such as:

  • Commercial construction companies
  • Developers
  • Custom home builders
  • Commercial builders
  • Contractors doing renovations and builds

How to Get Construction Insurance

Construction can be a long and difficult process. In fact, there are many risks involved in a commercial construction project.

Fortunately, construction insurance in Ontario will help protect you against many things such as direct damage to the project, including fire, as well as things like project interruption costs and wrap-up liability insurance.

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