Course of construction insurance—also called builder’s risk—is first-party property insurance for insured construction work, materials and related project property while a building is being built, renovated or repaired. It addresses physical loss or damage during the construction phase. The policy wording determines the insured property, parties, perils, locations and point at which coverage ends.
What builder’s risk is designed to protect
A project accumulates value before it is complete. Materials have been purchased, labour has been incorporated into the work and several parties may have an insurable interest in the same property. A course-of-construction policy is designed to insure that shared project exposure rather than leave every contractor to litigate responsibility after a physical loss.
The Supreme Court of Canada has described builder’s risk, contractors’ risk and course-of-construction insurance as forms of all-risk property insurance used for physical damage on construction sites. The Court also recognized their purpose of providing broad project coverage and avoiding litigation among construction participants.
Covered property depends on the schedule and wording
A policy may cover the work in progress, materials intended to become part of the project and certain temporary works. Coverage for property in transit, at an off-site storage location, existing structures, contractors’ equipment, scaffolding, delay costs or professional fees is not automatic. Those items may require express wording, scheduled values or endorsements.
Before work starts, confirm:
- the project address and description
- the declared construction value and how changes will be reported
- whether existing structures are included during a renovation
- transit and off-site storage limits
- coverage for temporary works and contractors’ equipment
- any soft-cost or delay-in-completion coverage
- deductibles and sublimits
All-risk does not mean every construction loss is covered
Most builder’s-risk disputes turn on the actual insuring agreement and exclusions. An all-risk form usually requires the insured to establish fortuitous direct physical loss or damage to insured property. The insurer then has to establish an exclusion it relies on.
Faulty-workmanship wording needs particular care. In Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., the Supreme Court interpreted a standard exclusion that removed the cost of making good faulty workmanship but restored coverage for resulting physical damage. The Court held that the exclusion removed only the cost of redoing the faulty work on the facts before it; it did not exclude the resulting damage to the windows.
That decision does not make every defect or resulting loss covered. Policies differ, and exclusions may address faulty design, materials, workmanship, wear, settling, flood, earthquake, testing, delay or other risks. The exact wording and facts control.
For a fuller explanation of the coverage structures, see named perils vs. all-risk insurance.
Identify every party that should be protected
The owner, general contractor, subcontractors and lenders may each have an interest in the project. The construction contract usually allocates responsibility for buying the policy and sets minimum requirements, but the issued policy—not the contract alone—determines who is insured.
Confirm the named insureds and any class of unnamed insureds with the broker or insurer. Do not assume that calling a party an “additional insured” in the construction contract has automatically added it to the property policy. The policy language, declarations and endorsements must implement the contractual requirement.
Coverage can end before every task is finished
There is no universal rule that builder’s-risk coverage lasts until a certificate of occupancy. Depending on the wording, coverage may end on a stated date, when the owner accepts the work, when the project is occupied or put to its intended use, when the insured’s interest ends, or when permanent property insurance takes over.
Phased occupancy and partial completion create particular risk. Tell the insurer before any portion is occupied or used and obtain written confirmation of how coverage will continue. Coordinate the transition to permanent property insurance so neither insurer assumes the other policy is responding.
Builder’s risk and liability insurance do different jobs
Builder’s risk is first-party property coverage for the insured project. Commercial general liability insurance addresses covered legal liability for bodily injury or property damage to others. The policies can overlap factually, but one is not a complete substitute for the other.
A liability policy may respond to some resulting damage claims and may exclude others, including parts of the insured’s own work depending on the wording. A builder’s-risk policy may cover physical project damage without deciding which contractor was negligent. Review the construction contract, builder’s-risk wording, liability policies, professional liability coverage and equipment insurance as a coordinated program.
A practical placement checklist
Before construction begins:
- identify who must purchase the policy under the construction contract
- confirm the project value, duration and all insured parties
- schedule existing structures, transit, off-site storage and soft costs where needed
- review exclusions, deductibles, sublimits and testing provisions
- establish notice procedures for material project changes and phased occupancy
- confirm the handoff date and conditions for permanent property insurance
Course-of-construction insurance is therefore project-specific property protection, not a generic promise that anything happening on a construction site is covered. Its value depends on matching the policy’s property, parties, period and exclusions to the actual project before work begins.