With spring underway, the Insurance Bureau of Canada (IBC) is reminding homeowners planning construction or renovation projects to review their insurance coverage before work begins, warning that standard policies may leave gaps during active builds.
In a column, Edward Zhakata, manager of consumer and industry relations for the Atlantic regional office of the Insurance Bureau of Canada, wrote that standard property insurance policies are designed for occupied homes and may not fully cover a property during construction or renovation.
“Before any work begins, take the time to review the insurance you’ll need to stay protected throughout the project,” Zhakata said
According to the IBC, homeowners planning to build or renovate should notify their insurer, as coverage terms may change and additional protection – such as a builder’s risk policy, also known as a course of construction policy – may be required.
A builder’s risk policy, the IBC noted, covers loss or damage to the structure itself, as well as building materials and supplies used throughout the project. For commercial properties, such as apartment buildings, the policy may be extended to include what the bureau calls “soft costs,” including architectural fees, permit costs, financing expenses, or professional fees incurred when construction is delayed by an insured loss.
The IBC noted that most contractors carry a commercial general liability (CGL) policy, which protects against claims for bodily injury or property damage during business operations. However, the bureau cautioned that CGL policies generally do not cover damage to the construction project itself.
“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,” the IBC said.
The bureau said the cost of builder’s risk coverage is ultimately borne by the homeowner, though it may be arranged through a broker or by a contractor who includes the premium as a line item in the project quote.
The IBC also warned that builder’s risk policies carry exclusions. The cost of repairing faulty workmanship is typically not covered, and some policies include conditions related to extended vacancy or unoccupied buildings during construction.
“Reviewing these exclusions early can help avoid surprises later,” the bureau said, advising homeowners to request the full exclusions section from their insurance representative.
Zhakata added that maintaining close contact with one’s insurer throughout the project is key to remaining adequately covered from planning through to the final walkthrough.
