Course of construction insurance, often called builder's risk insurance, is a specialized property policy that covers buildings, structures, and materials while they are being built, renovated, or repaired. Unlike standard commercial property insurance, which protects completed buildings in regular use, course of construction coverage is designed for the unique risks that exist when a property is in transition — open to the elements, full of combustible materials, visited by multiple trades, and not yet secured or occupied. If you are undertaking a construction project as a building owner, general contractor, or developer, understanding this coverage is essential to protecting your investment from the moment ground is broken until the certificate of occupancy is issued.
The fundamental purpose of course of construction insurance is to protect the insurable interest that various parties hold in a project before it becomes a finished, operational building. During construction, a partially completed structure has real value — materials have been purchased, labour has been invested, and the building is taking shape — but it also faces heightened exposure to loss. Standard property policies typically exclude buildings under construction or impose severe limitations on coverage for them. Course of construction insurance fills this gap by providing first-party property coverage specifically tailored to construction-phase risks. The policy typically covers the structure itself, building materials stored on site or in transit, temporary structures like scaffolding and construction trailers, and sometimes soft costs such as architect fees or financing charges that would recur if a loss delayed completion.
The perils covered under a course of construction policy vary depending on whether the policy is written on a named-perils or all-risks basis. Named-perils policies cover only losses caused by specifically listed events, such as fire, lightning, windstorm, hail, explosion, or vandalism. All-risks policies — more accurately described as open-perils policies — cover any cause of loss except those explicitly excluded. Most commercial course of construction policies in Canada are written on an open-perils basis, which provides broader protection but still contains significant exclusions. Common exclusions include damage caused by faulty workmanship or defective materials, normal settling or shrinkage, wear and tear, and earth movement unless earthquake coverage is specifically added. Flood coverage is often excluded or available only by endorsement, and the same is true for damage caused by testing of equipment or machinery. Reading the exclusions carefully is as important as understanding what the policy covers, because the construction environment creates many opportunities for losses that fall into excluded categories.
Several parties typically have an insurable interest in a construction project, and the question of who purchases and is named on the course of construction policy is a matter of contract negotiation. In many projects, the building owner purchases the policy and names the general contractor and subcontractors as additional insureds, which simplifies claims and reduces the likelihood of subrogation disputes between parties working on the same project. In other arrangements, the general contractor purchases the policy as part of its contractual obligations. Construction contracts governed by standard forms such as the Canadian Construction Documents Committee templates often specify which party is responsible for procuring builder's risk coverage and set minimum coverage limits. When you are negotiating a construction contract, confirm who is responsible for the policy, what perils it must cover, what the deductible is, and whether all parties with an interest in the work are protected under it.
The policy period for course of construction insurance typically begins when construction materials are first delivered to the site or when work commences, whichever occurs first, and ends when the building is completed and accepted by the owner, when the building is occupied, or when a specified policy expiration date is reached. Some policies automatically terminate when the building is put to its intended use, even if construction is not fully complete, so if you plan to occupy part of a building while finishing another section, you need to coordinate with your insurer to ensure continuous coverage. Transition from course of construction coverage to permanent property insurance must be handled deliberately; a gap between policies leaves the newly completed building uninsured at the very moment it becomes most valuable.
From an Alberta perspective, course of construction insurance is governed by the Insurance Act and the common law principles applicable to property insurance generally. Alberta insurers must comply with statutory conditions that govern policy interpretation and claims handling, and disputes over coverage are resolved in accordance with the principle that ambiguities in policy language are construed against the insurer. British Columbia and Ontario have comparable statutory frameworks under their own Insurance Acts, and the core principles of course of construction coverage are consistent across Canadian jurisdictions. Where provincial building codes or contract law affect project timelines or contractual allocation of risk, local legal advice may be warranted, but the insurance product itself functions similarly nationwide.
Business owners undertaking construction projects should also understand how course of construction insurance interacts with other coverages. General liability insurance covers bodily injury or property damage to third parties caused by construction operations, but it does not cover damage to the project itself — that is the domain of the builder's risk policy. If you are renovating an existing building, your existing property policy may provide some coverage, but most commercial property forms contain construction exclusions or limitations that reduce coverage during renovation. Confirming in writing with your insurer how your property policy responds during construction, and whether you need a separate course of construction policy or an endorsement, prevents unpleasant surprises after a loss.
Ultimately, course of construction insurance exists because buildings under construction face risks that finished buildings do not. The coverage protects your financial stake in a project from fire, severe weather, theft, vandalism, and other covered perils during the vulnerable months or years when construction is underway. Securing appropriate coverage before work begins, ensuring all parties with an insurable interest are protected, and understanding what the policy excludes are foundational steps in managing construction risk responsibly.