Builders risk insurance, also called course of construction or COC, is a property policy that pays for physical damage to a structure while it is being built. It covers the unfinished building and the materials on site, in transit and in temporary storage against perils like fire, wind, theft, vandalism and explosion, from groundbreaking to completion. It is usually the property owner who buys it, not the trades, and the standard CCDC 2 contract puts the duty on the owner. The most expensive failure on any job is the owner and the contractor each assuming the other arranged it, so settle who buys builders risk in writing before the first shovel goes in.
What builders risk covers
Builders risk and course of construction are the same product under two names. It is a short-term, first-party property policy that responds to physical loss or damage to a structure under construction. Cover typically extends to:
- The building and its permanent fixtures as they are installed.
- Materials and supplies on site, in transit to the site, and in temporary off-site storage.
- Loss from fire, lightning, wind, hail, theft, vandalism and explosion.
It runs from the start of construction to completion or occupancy. What it does not cover is just as important: it does not pay for consequential losses such as third-party injury or damage your work causes to others (that is your CGL, see Commercial General Liability), and it does not cover employee dishonesty. It is property cover for the thing being built, full stop.
Who buys it, and the gap that bites
Usually the property owner buys builders risk. A general contractor buys it only if they own the building or the contract specifically assigns them the duty. The standard CCDC 2 stipulated-price contract apportions builders risk to the owner. There is also a useful legal principle in Canadian construction law: where an insurance clause names the contractor as an insured under the owner's builders risk policy, the owner and their insurer generally cannot then turn around and sue the contractor for a covered loss, unless the contract expressly preserves that right. That is why being named on the owner's policy matters to a trade.
The classic gap appears when nobody is named as responsible. Owner and contractor each assume the other arranged the cover, a fire or a flood hits the half-built structure, and there is no policy behind it. Put the obligation, and the named insureds, in the contract before you break ground.
Cost
As an indication only, builders risk runs about 1 to 5 percent of the total construction budget in Canada. A $2 million build might generate roughly $20,000 to $40,000 in premium depending on scope, location, project type and duration. That is a benchmark range, not a quote: your broker prices the actual project.
On big projects: wrap-up programs
On large projects, often in the range of $50 million or more in construction value although the threshold varies, the owner or lead contractor may consolidate cover under a wrap-up, or Controlled Insurance Program, instead of every party carrying their own. There are two flavours:
- OCIP (Owner Controlled Insurance Program): the owner is the policyholder and pays the premiums, and all enrolled contractors and subcontractors are covered under the one policy. Common on public infrastructure and P3 work.
- CCIP (Contractor Controlled Insurance Program): the lead general contractor or construction manager is the policyholder and pays, covering the owner, the GC and the subs.
Both eliminate the gaps caused by a sub's lapsed policy, streamline claims, usually fold in a site safety program, and remove cross-litigation among enrolled parties. The wrap-up liability component is typically in the 0.5 to 2 percent of construction value range. If you are enrolled in a wrap-up, exclude that project from your own practice policy so you are not paying twice.
The claim traps that deny builders risk
Three documented conditions catch contractors out on property cover during construction:
- The vacancy clause. A standard property policy can limit or void cover after 30 to 60 consecutive days of vacancy. A spec home sitting unsold, or a house empty during a renovation, can be deemed vacant even with furniture left inside, wiping out cover for fire, vandalism and water damage. Tell your insurer before a building goes vacant and obtain a vacancy permit or endorsement, usually issued in 90-day increments at extra premium, and document regular inspections.
- The hot-work permit condition. Many policies treat welding, torch-on roofing, cutting and grinding as a condition precedent: no written hot-work permit and a maintained fire watch, no cover, regardless of fault. This bites roofers using torch-on membrane especially hard. Run a written permit system and keep a fire watch after the work stops.
- The winter heat-maintenance clause. Cover for frozen-pipe and freeze damage can depend on you taking reasonable care to maintain heat in an unoccupied or under-construction building. Set a minimum interior temperature, arrange frequent check-ins during the heating season, and keep dated logs and utility bills.
Common mistakes
- Assuming the other party bought it. Name the responsible party, and the named insureds, in the contract before you start.
- Treating builders risk as your liability cover. It is property cover for the building. Third-party claims sit under CGL.
- Tripping the vacancy clause on a spec build. A home that sits empty pre-sale can lose cover after 30 to 60 days. Get the endorsement.
- Doing hot work with no permit. A torch-on roof fire with no permit on file is a denied claim, even if the fire was not your fault.
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