Builder's Risk Insurance Ontario

Ontario Builder's Risk Insurance for Builders, Contractors and More

While there was once a time when most people built their own homes as best they could, those days are long gone—modern buildings are incredibly complex and constructing or remodelling them is certainly not a project that amateurs can undertake. As a home builder, renovator or specialized contractor, you provide an essential service, and your skill and experience are necessary to get people the homes and commercial properties of their dreams.

But as anyone in the construction industry knows, buildings under construction can be much more vulnerable to damage and destruction than a completed building. That means contractors and builders who are responsible for properties under construction are vulnerable to potentially major financial setbacks when something like a fire or natural disaster causes severe damage to a construction project that is underway. How do you protect yourself against that risk? The answer is to call Morison Insurance and speak with an experienced broker about a builder's risk insurance quote. Ontario contractors, builders, property owners, and more can have the peace of mind that comes with knowing the project they are working on is protected by the right insurance coverage during the vulnerable period between when construction begins and when it is completed.

What is Builder's Risk Insurance?

Builder's risk insurance is a type of commercial property insurance coverage that applies specifically to buildings under construction. It's also referred to as "course of construction insurance" because it protects builders and others from paying out of pocket to restore parts of a building (or the entire building) following damage caused by an insured peril during construction.

For example, imagine framing work has begun for a new house when a severe storm whips through the building site and causes significant damage to not only the framing that has already been done but also the materials that were on site but have yet to be used. Suppose the builder's risk insurance is in place. In that case, the insurance company will provide compensation for the cost of replacing the damaged materials and the expense of restoring or rebuilding the damaged framing.

Who Should Have Builder's Risk Insurance in Ontario?

Anyone considered legally responsible for all or a portion of a building under construction needs the protection of the right builder's risk insurance policy. That responsibility often falls on the property owner, so it's typically recommended that property owners invest in builder's risk insurance. Ontario contractors and builders should be aware, however, that many property owners expect and/or require them to have builder's risk insurance coverage, so it's important to clarify expectations and make sure adequate coverage is in place during the planning phase of a construction or renovation project.

The parties or professionals who may need builder's risk insurance include:

• Property owners
• Real estate developers
• Construction companies
• Home builders
• General contractors
• Renovation contractors
• Tradespeople
• Engineers
• Project managers

What Types of Perils Does Builder's Risk Insurance Cover?

When considering the types of risks or perils that are covered by builders' risk insurance, Ontario policyholders need to know that builders' risk insurance is typically an all-risk comprehensive policy. This means it covers all risks besides those expressly excluded in the policy. In practice, builder's risk insurance offers protection against financial losses for a wide range of risks to both structures under construction and building materials that are on-site but have not yet been used.

The exact perils that are covered will vary to some degree based on the insurance provider, and additional coverage can be added to the policy with an endorsement. Here are some basic perils you can expect to be covered by builder's risk insurance.

Fire and Natural Disasters

When you think of natural disasters, you may be picturing the devastating effects of a tornado or tsunami, which are not necessarily all that common in Ontario. But it's important to remember that even a big storm, from high winds to large hailstones, can devastate a building under construction. If a major storm hits a construction project at precisely the wrong time, it could destroy all the progress that has been made so far.

Fire damage can sometimes result from an accident, and even a minor accident, like carelessly discarding a lit cigarette, can have dire consequences, but fire can also happen in ways that are entirely beyond anyone's control. That includes lightning strikes, wind-blown flames from a fire on a neighbouring property and much more. Fires and natural disasters are a standard part of most types of property coverage, and builder's risk insurance is no exception.

Accidents

Many people, even seasoned professionals, are prone to assuming that they don't need insurance coverage for accidental damage because they know what they're doing and will exercise all due care and caution to avoid any accidents. Unfortunately, that's not a realistic expectation for even the most experienced contractor or builder. In many cases, accidental damage doesn't happen because someone was lazy or careless but simply because no one can do everything flawlessly 100% of the time, and some situations are just unavoidable. You can expect builder's risk insurance to cover accidents such as impacts from vehicles or heavy machinery, explosions and more.

Criminal Damage

One of the reasons building sites are more vulnerable to damage than completed buildings is that, depending on the construction phase, the options to secure the property against theft and criminal mischief completely can be very limited. Building sites in urban and suburban areas are particularly susceptible to theft and vandalism. Should a construction project be vandalized or building materials stolen from the site, the builder's risk insurance will provide coverage to repair the damage and replace missing materials.

Additional Coverage

While the perils listed above are the key risks covered by standard builder's risk insurance, Ontario policyholders may need or want additional coverage for other types of perils, and that's certainly possible. That could include protection from the costs associated with perils such as flood damage and soft costs such as surveying, architectural plans, permitting and more. For example, if a fire tears through a building under construction and levels it to the ground, it may be necessary to have the site re-surveyed and get engineering and architectural adjustments to the original plans, along with paying for debris removal and demolition of a structure that is damaged beyond repair. With an endorsement to add coverage for those types of soft costs to your builder's risk insurance, you can receive insurance compensation to avoid having to pay out of pocket for related expenses.

What is Not Included With Builder's Risk Insurance in Ontario?

Regarding builder's risk insurance, Ontario policyholders should keep in mind that this type of policy applies to under-construction projects and buildings undergoing major renovations only. Once the construction or renovation is complete, another form of property insurance, home insurance or commercial property insurance, is necessary to receive insurance compensation for costs such as repair, restoration and replacement.

Because builder's risk insurance is a type of property coverage, it doesn't offer any liability protection. Suppose third-party bodily injury or third-party property damage occurs on the building site, leading to a lawsuit, for example. In that case, the litigation costs will not be covered by builder's risk insurance—that would fall under commercial general liability insurance or potentially personal liability coverage instead.

A type of liability insurance called wrap-up liability coverage is often confused with builder's risk insurance because they both apply to situations involving buildings under construction. Still, two different types of insurance require separate policies.

Other types of damage that are not generally covered by builder's risk insurance in Ontario include:

• Bodily injury
• Damaged equipment and tools
• Damaged vehicles
• Faulty workmanship
• Contractual penalties
• Government fines and fees
• Mechanical breakdowns

If you're not confident about what exactly is covered by your builder's risk insurance policy, the best course of action is to start a builder's risk insurance quote with your qualified broker at Morison Insurance and consult with them to ensure you have all the types of coverage you need for adequate insurance on and off the building site.

Is Builder's Risk Insurance Mandatory?

Like most types of insurance coverage, builder's risk insurance is not legally required by the Ontario government—but that doesn't mean other parties won't require it. For example, property owners may require contractors to have builder's risk insurance in place before they sign a contract with them so they can ensure that there will be financial recourse available in the event of an insured peril such as a natural disaster or fire. Suppose the contractor cannot provide proof of insurance showing the requested coverage and coverage limits. In that case, the property owner or business owner may choose not to follow through with the contract, and the contract will ultimately go to a competitor instead.

Even if no parties require builder's risk insurance, it's not a good idea to work on a construction or renovation project that needs to be adequately insured. Suppose you are the property owner, and there's no builder's risk coverage. In that case, you may not be willing and able to cover the costs of starting from scratch in the event of a disaster, not to mention the expense of replacing all the damaged or destroyed building materials and soft costs such as re-surveying or re-permitting the project, which would bring the entire project to a halt and leave you to deal with costs such as property taxes and disaster clean-up for a property you can't even use in the way you originally intended.

If you are the building contractor, you may be responsible for covering those costs yourself, depending on the peril that occurred and your contractual obligations. But even if you're not, if the property owner doesn't have builder's risk insurance in place and can't afford to pay the associated expenses, you could find yourself not only out of a job but also potentially find yourself with no recourse to get paid for the work you've already done that was destroyed.

Can I Get Ontario Builder's Risk Insurance After Construction Has Begun?

Understanding the importance of getting a builder's risk insurance in place before breaking ground on a new construction or renovation project is critical. It is sometimes—but not always—possible to get builder's risk insurance for a project that has already begun, but it will be considerably more costly than if it was obtained prior to the start of construction or renovation.

The most significant level of risk is when a project is nearing completion because that's when almost all of the building is constructed. There's far more in place that could potentially be destroyed, but premiums for Ontario builder's risk insurance are determined starting from day one of the project. That's why insurance companies may decline to offer builder's risk insurance for a project already underway or may charge much higher premiums than they otherwise would have.

Where Can I Get A Builder's Risk Insurance Quote in Ontario?

Suppose you're a property owner, contractor or another party interested in a building project. In that case, the first step is to call the knowledgeable insurance brokers at Morison Insurance and learn more about your options for the right builder's risk insurance quote. Give us a call today at 1-800-463-8074 and get the peace of mind that comes with knowing you have the right insurance coverage.

This content is written by our Morison Insurance team. It is provided for general information only. Insurance needs differ from person to person, and this article is therefore not a substitute for professional advice about your individual insurance needs which can be obtained by speaking to one of our brokers.