Builder's Risk Insurance in Ontario
Comprehensive Protection for Your Construction Project
Builder’s risk insurance, also known as course of construction insurance, is a vital policy designed to protect construction projects from potential losses. In Ontario, this type of insurance provides essential coverage for new buildings, major renovations, and expansions. It ensures developers, contractors, and property owners are financially protected against damage or loss to the project. This insurance is an invaluable asset for anyone involved in construction, helping mitigate risks from fire, theft, vandalism, and various other perils that can disrupt or delay a project.
What is Builder’s Risk Insurance?
Builder’s risk insurance is a type of property insurance that offers financial protection for buildings and materials during the construction phase. Typically, it covers the structure under construction, as well as materials and equipment on-site, against risks such as fire, theft, wind, hail, and vandalism. This policy is different from general liability insurance, which covers bodily injuries and third-party property damage due to the contractor’s operations.
In most cases, builder’s risk insurance is taken out by either the property owner, contractor, or developer, depending on who is responsible for the construction project. It is a temporary policy, usually effective from the start of construction until the project is complete and ready for use.
Key Features and Coverages of Builder’s Risk Insurance
- Protection for Property Damage:
Builder’s risk insurance provides comprehensive coverage for damage to the structure under construction, along with materials and equipment stored on-site. It typically covers risks from fire, lightning, wind, hail, and other natural disasters, as well as theft and vandalism. This ensures that if any physical damage occurs, you’re covered for repair or replacement costs, helping keep the project on track. - Coverage for Materials and Equipment:
Materials and equipment essential to the construction process are covered under builder’s risk insurance. This includes materials in transit or temporarily stored off-site, so that even if supplies are stolen or damaged before they reach the construction site, they’re still protected. Equipment such as scaffolding, temporary structures, and construction materials needed to complete the project are also included. - Soft Costs Coverage:
Soft costs are expenses incurred due to a delay in the project, such as architectural fees, legal fees, and interest on construction loans. These costs can be covered under a builder’s risk insurance policy if the delay is due to an insured loss. For instance, if a fire causes a delay, the insurance can cover these additional costs to ensure the project can still be completed within budget. - Temporary Structures:
Builder’s risk insurance also covers temporary structures used in the construction process, such as scaffolding, fencing, and storage units. By including these in your policy, you protect not only the main construction but also the ancillary elements necessary for a smooth construction process. - Delay in Completion Coverage:
Builder’s risk policies can be tailored to include coverage for losses related to delays in project completion caused by an insured event. This coverage might help compensate for lost rental income or sales due to construction delays, making it an ideal option for commercial developers and property owners counting on revenue from completed projects.
Who Needs Builder’s Risk Insurance?
Builder’s risk insurance is essential for various parties involved in construction projects, including:
- Property Owners:
If you’re constructing a new property or renovating an existing structure, builder’s risk insurance protects your investment from potential risks during construction. - Contractors and Subcontractors:
Contractors often carry this insurance to protect the project and their work from damage. It ensures that, in case of a loss, the project can continue without placing a significant financial burden on the contractor. - Developers:
For commercial projects or large residential developments, developers require this insurance to ensure financial stability in case of a loss. This coverage protects the value of the development and helps secure lenders’ confidence.
Cost of Builder’s Risk Insurance in Ontario
The cost of builder’s risk insurance is typically calculated as a percentage of the total project cost, ranging between 1% and 5%. For example, a $500,000 residential project could see premiums ranging from $5,000 to $25,000, depending on factors such as:
- Project Value:
Higher-value projects will require more coverage, thus increasing the cost. - Location:
The location of the project can affect the premium, especially if the area is prone to certain natural disasters. - Construction Duration:
The longer the project timeline, the higher the risk exposure, which can increase costs. - Type of Construction Materials:
Certain materials, like wood, may be more susceptible to damage, affecting premium costs.
Steps to Buy Builder’s Risk Insurance
- Assess Your Project:
Understand the scope, duration, and value of your construction project. Consider potential risks specific to your project, such as weather-related risks or risks related to theft. - Work with an Insurance Broker:
An experienced broker from Best Buy can help you understand the specific coverages your project requires. They’ll assess the risks, provide quotes from multiple providers, and help you select the best policy. - Customize Your Coverage:
Builder’s risk insurance policies can be customized to meet the unique needs of each project. You can add coverage for soft costs, temporary structures, and transit coverage for materials as necessary. - Compare Quotes:
It’s important to compare quotes from various insurers to ensure you’re getting comprehensive coverage at a competitive rate. Your Best Buy broker can assist with this, providing multiple options based on your needs. - Review Policy Regularly:
If the construction project experiences delays or changes in scope, be sure to adjust your builder’s risk insurance policy accordingly. This ensures you have the proper coverage throughout the construction phase.
Important Exclusions and Limitations
While builder’s risk insurance covers a wide range of risks, certain exclusions apply. Most policies do not cover:
- General Liability:
This policy does not protect against third-party injuries or property damage unrelated to the construction. Contractors usually need a separate general liability policy. - Contractor Errors:
Builder’s risk does not cover poor workmanship, design errors, or faulty materials. - Flood and Earthquake Damage:
Many builder’s risk policies exclude these perils unless specifically added.
Protect Your Construction Project with Builder’s Risk Insurance
Builder’s risk insurance is essential for any construction project, providing financial protection against a wide range of risks. By covering the building under construction, materials, and potential delay costs, this insurance ensures your project remains financially stable even in the face of setbacks.
Why Best Buy Insurance
- Best Buy Insurance is your trusted partner in protecting construction projects from unexpected risks.
- Our Builder’s Risk Insurance offers comprehensive coverage for structures under construction, from materials to equipment.
- With our expertise, you can build with confidence, knowing your project is safeguarded against financial loss.
Get a Quote Today!
Protect your construction project with Builder’s Risk Insurance. Contact us for a personalized quote that covers your project’s unique risks.
Builder’s Risk Insurance FAQs
Builder’s Risk Insurance covers property and materials during construction, protecting against damages caused by fire, theft, vandalism, and some natural disasters.
This insurance is essential for contractors, property owners, and developers involved in construction or renovation projects.
Typically, it covers the project as a whole but verifying specific subcontractor coverage with the policy provider is crucial.