Building A Home Insurance

Building a Home: Insurance You Need for Home Construction

Starting to build your own home is like embarking on a big, thrilling project. It’s a journey full of decisions, surprises, and accomplishments. However, amid the excitement, it’s important to remember that unexpected events, like bad weather, stolen materials, or accidents, can happen at any time during the process. This is where having the right insurance comes into play.

In the world of home construction, having the right insurance means you can focus on making decisions and dealing with the day-to-day challenges of building rather than worrying about what could go wrong. This guide to home construction insurance will explore the essential types of insurance you should consider when building your home so you can make informed decisions that keep your construction project safe and sound.

Insurance coverage for new construction

When you start building your home, getting insurance is one of the first things to consider. But what exactly is construction insurance, and why is it so important?

In simple terms, course of construction (COC) or builder’s risk insurance is like a safety blanket covering your building project. It’s there to help you if things go wrong, like if bad weather damages your partially built home or if someone gets hurt on the job.

COC or builder’s risk insurance is important because building a home is a big project with many risks. Materials can get stolen, workers might get injured, or natural disasters could damage what you’ve already built. Insurance helps protect you from these financial risks, ensuring that an unfortunate event doesn’t leave you struggling to cover the costs.

What is builder’s risk insurance?

Builder’s risk insurance is like a temporary safety net for your home while it’s under construction. It’s only meant to protect your project while it’s being built. Once your house is complete, you’ll use your regular homeowner’s insurance policy for long-term coverage. Here’s what builder’s risk insurance covers:

Damage from severe weather

If a storm, like heavy rain or strong winds, damages the structure you’re building, this insurance can help pay for repairs or rebuild what was damaged.

Theft and vandalism

If someone decides to steal materials from your site or vandalize the property, builder’s risk insurance can cover the cost of replacing those materials or fixing the damage.

Fire and explosions

Although we hope it never happens, fires can occur on construction sites. If a fire damages your under-construction home, this insurance helps cover the cost of repairing or rebuilding what was lost.

Materials and equipment

This insurance also covers your own materials, tools, and equipment you use to build the house. So, if something happens to them, you won’t have to pay out of pocket to replace them.

Other types of insurance for your construction project

Building your home is not just about picking the right tiles or paint colours. You also need to choose the right types of insurance to protect your project. Here are a few key types of insurance you should know about when it comes to building a home:

Liability insurance

Imagine someone visiting your construction site and accidentally getting hurt or your construction accidentally causing damage to your neighbour’s property. Liability coverage is there to cover the costs of third-party bodily injury or property damage, protecting you from paying out of your own pocket.

Workers’ compensation coverage

If you’re hiring people to help build your home, this insurance is crucial. It helps cover medical costs and lost wages if someone gets injured while working on your site. This way, you’re not financially responsible if accidents happen.

Construction all-risk insurance

This big umbrella insurance coverage can cover almost everything during the building process. It includes protection against a wide range of incidents, from natural disasters to construction mistakes. It’s like a comprehensive plan that keeps you safe from many unexpected events.

Who needs builder’s risk insurance?

Builder’s risk insurance is needed by anyone who is involved in constructing a new building or making major renovations to an existing one. This could be:

  • Homeowners who are building their dream home or doing major or structural renovations to their existing home
  • Construction companies working on a project
  • Developers creating a new residential or commercial space

Essentially, if you’re investing time, money, and resources into constructing or significantly altering a building, you should consider getting builder’s risk insurance. It’s a smart way to safeguard your investment against the many things that can go wrong.

Do I need homeowners insurance during construction?

Yes, you still need homeowners insurance when you’re building or renovating your house. While builder’s risk insurance takes care of the construction part, homeowners insurance covers other important things. Here’s why it matters:

Personal property protection

If you have personal belongings stored on the construction site or in an existing part of the home that’s not under construction, homeowners insurance can protect these items from theft or damage.

Liability coverage

Homeowners insurance includes liability coverage, which protects you if someone gets injured on your property during construction (and the incident isn’t directly related to the construction work). For example, if a friend visits the site, falls, and gets hurt, homeowners insurance can help cover their medical bills.

Living expenses

If you’re renovating your current home and something happens to make it unlivable and you need to live elsewhere during construction, some homeowners insurance policies may help cover additional living expenses if the renovation causes your home to be uninhabitable due to an insured loss.

Does my standard homeowner’s insurance policy cover my renovation project?

No, standard home insurance doesn’t cover renovations. Homeowners insurance provides coverage for your personal belongings, liability issues not covered by builder’s risk, and sometimes additional living expenses. On the other hand, a builder’s risk insurance focuses on the construction or renovation itself—the structure and building materials.

It’s wise to review your existing homeowners insurance policy and discuss your construction plans with your insurance company or an insurance broker. They can advise you on whether your current policy is sufficient or if you need to adjust your coverage to ensure you’re fully protected during the construction phase.

Who has to buy builder’s risk insurance – the homeowner or the contractor?

When purchasing builder’s risk insurance for your construction project, the responsibility can fall on either you, as the homeowner, or your contractor, depending on the project’s details and the agreements you’ve made. If you’re taking a hands-on approach and managing the construction yourself, or if your lender insists, you might need to purchase the insurance yourself.

However, if you’re working with a general contractor, they often handle the insurance for projects they oversee, which should be specified in your contract. In some situations, both you and your contractor might be named on the policy to protect both parties and simplify the claims process.

The best approach is to have a clear conversation with your contractor before the project begins. This discussion should clarify who will purchase the builder’s risk insurance and make sure this agreement is reflected in your contract. If you’re financing the construction, also check with your lender to understand their insurance requirements. Furthermore, be sure to inform your home insurance provider of the general contractor’s insurance details if you hire one for your renovations.

Frequently asked questions

What kind of insurance do you need when building a home?

You need builder’s risk insurance to cover the construction itself and homeowners insurance for personal property and liability protection. Together, they help protect your project and belongings and cover injuries on your property.

Can you insure a damaged building?

Yes, but it might be more complicated. You’ll need to talk to insurance companies about getting a policy that specifically covers repairs and addresses the building’s current condition. The details and cost will depend on the extent of the damage.

Is the course of construction insurance necessary?

Yes, it’s necessary because it protects your building project from unexpected events like theft, weather damage, and accidents. It’s another name for builder’s risk insurance and is crucial for financially keeping your construction on track.

What is builders risk insurance in Ontario?

In Ontario, builder’s risk insurance is a type of insurance that covers new buildings under construction or existing buildings undergoing renovations. It protects against losses from things like fire, vandalism, and weather damage during construction.