Course of construction insurance, often called builder’s risk insurance, is property coverage designed for the period when a building is being constructed or substantially renovated. It can protect the work in progress, materials and other insured project property against covered loss or damage while the project is underway.
What course of construction insurance protects
Whether a particular project needs a separate builder’s risk policy depends on the existing property insurance, the construction contract, the lender’s requirements and the scale of the work. Insurance Bureau of Canada cautions that standard property policies are designed for occupied properties and that planned construction or renovations should be disclosed because coverage terms may change and builder’s risk coverage may be required.
New construction is the clearest use case
A new building presents a different property risk from a completed, occupied building.
The project changes in value every week. Materials can be stored on site before installation. The building may be open to weather, theft and vandalism. Multiple contractors can have an insurable interest in the same work.
Builder’s risk is designed for that construction phase rather than for ordinary ongoing occupancy.
Government construction contracts illustrate the same structure. Alberta infrastructure specifications, for example, can require an all-risks Builder’s Risk policy or installation floater for the work, materials and specified project interests and can require the coverage to remain in force until substantial performance.
A private project will depend on its own contract and policy, but the risk-management principle is similar.
Renovations can also require different coverage
Builder’s risk is not only for ground-up construction.
A major renovation can materially change the risk insured under an ordinary property or homeowners policy. IBC advises property owners to notify their insurer before the work begins because the existing terms may change and additional coverage may be necessary.
The trigger is not a universal dollar amount or percentage of building value. A kitchen refresh, structural addition, vacant gut renovation and occupied commercial expansion can all produce different underwriting answers.
What the policy can insure
The exact insured property depends on the form, but construction insurance can be structured to protect the work and materials that will become part of the completed project.
Policies can also address property at temporary locations, property in transit, temporary works and other project interests, depending on the wording and endorsements.
When the coverage needs to be in place
The construction contract should identify who is responsible for obtaining the insurance, who must be included as an insured or other insured, what amount is required and when the coverage may terminate.
That contract allocation is important because owner, contractor, subcontractor, lender and consultant interests can overlap.
“All risks” still has exclusions
An all-risks builder’s risk policy does not mean every possible construction loss is covered.
The policy still contains exclusions, conditions, deductibles and definitions. Defective design or workmanship, cyber events, pollution, delay and equipment breakdown can be treated differently depending on the form and endorsements.
Some policies cover resulting physical damage while excluding the cost of correcting the defective work itself. Others contain more specialized wording.
This is one area where a generic description should never replace the actual contract.
When does the policy end?
The end point is also policy-specific.
Government construction specifications often tie builder’s risk to substantial performance, while private forms may use occupancy, completion, acceptance, a stated date or another event.
Moving into part of a building or putting it to its intended use can therefore matter before the project team thinks of the job as “finished.”
The permanent property policy and the builder’s risk policy should be coordinated so the transition does not create an unintended gap.
Questions to settle before work starts
Before a substantial construction project begins, the insurance discussion should answer:
- who is responsible for purchasing builder’s risk
- which parties are insured
- what property and project costs are included
- what limit reflects the changing project value
- whether off-site materials and transit are covered
- which exclusions matter to the work
- what deductibles apply
- whether delay or soft costs need separate protection
- what event ends the policy
- when the permanent property coverage takes over
Course of construction insurance is therefore not simply “insurance before a building becomes a building.” It is the property-insurance layer for a project whose value, physical condition and ownership interests are changing during the work. Whether it is needed, and how broad it should be, comes from the project contract and the existing insurance read together.