What Insurance Do You Need When Building A House - KASE Insurance

What Insurance Do You Need When Building a House?

kase
Feb 11 2022

In the world of insurance, there are two types of similar-sounding insurance policies that future homeowners need to be aware of: building insurance (a.k.a buildings insurance) and builder’s risk insurance. Building insurance is a type of home insurance that it is meant to be considered once the home is already completed.

On the other hand, builder’s risk insurance, also known as course of construction insurance, is a vital type of insurance when building a house

Whether you are planning to build a home or you’re a contractor who is about to take on this type of project, this guide is for you. Here, we talk all about what builder’s risk insurance means and who usually purchases it. We will also further differentiate this type of insurance from the closely-associated “building insurance”.

Let’s get started!

A house under construction

Building Insurance vs. Builder’s Risk Insurance

A. Building Insurance

Building insurance, a.k.a buildings insurance, protects the structure of a completed house. It covers damage to the home itself. Examples of covered perils under building insurance include the following: 

  • Fire
  • Flood
  • Lightning
  • Earthquakes
  • Social unrest
  • Falling trees

Typically, building insurance is paired with “contents insurance” which provides protection for the items inside the house that aren’t a part of the home’s structure. This includes furniture, decorations, appliances, and so on. Contents insurance coverage is triggered, when the belongings are either stolen or damaged by a covered peril. 

B. Builder’s Risk Insurance

This type is the necessary insurance when building a house. It is also commonly referred to as “course of construction insurance.” Builder’s risk insurance provides a broad scope of coverage that helps to minimize loss in the face of various construction risks

It provides coverage for the following: 

  • Damage/theft/vandalism to the building under construction and its materials
  • Damage/theft to tools/equipment used in construction
  • Damage/theft to scaffolding and other temporary structures
  • Demolition and cleanup costs due to damage
  • Additional soft costs due to delays

It’s important to note that not all insurance policies are the same. Some builder’s risk insurance policies are more comprehensive than others. This is why it’s important to talk to a trusted broker when looking into this necessary insurance when building a house.

The right insurance expert will be able to customize a builder’s risk insurance policy to match your needs. In a later section, we’ll talk about common questions when getting builder’s risk insurance.

C. Building Insurance vs. Builder’s Risk Insurance: Side-by-Side

To wrap up this section, here is a summary of the key differences between building insurance and builder’s risk insurance

 

Building Insurance

Builder’s Risk Insurance

When it’s needed:

Once the house is complete

While the house is under construction

What it covers:

Property damage or vandalism after the house is completed

Damage/theft/vandalism while construction is ongoing

Who purchases it:

The homeowner

The project owner or the general contractor

 

Getting Builder’s Risk Insurance When Building A House: FAQs

Who Purchases Builder’s Risk Insurance?

Any major stakeholder in the construction of the house can purchase builder’s risk insurance. The owner of the project, who is typically the landlord or future homeowner of the property, can buy builder’s risk insurance themselves.

In some cases, the project owner can also request this from their general contractor. Sometimes, general contractors can show initiative to their clients by volunteering to get this kind of insurance, in accordance with the preferences of the project owner. 

Why Should Contractors Consider Getting Insurance When Building A House?

If you’re a general contractor who regularly handles house construction projects, bringing up builder’s risk insurance is a way to earn clients’ trust. By letting clients know about the risks they face without this type of insurance, you show genuine concern for the success of their projects. Furthermore, in case a covered peril strikes, clients will be all the more thankful that you informed them about this type of insurance. 

A house under construction that was struck by an earthquake, a peril covered in some builder’s risk insurance plans

Is Builder’s Risk Insurance Required?

Builder’s risk insurance is not required by Ontario law. However, some contractors and future homeowners opt for it anyway—as a protection against financial loss. 

What Are the Limits of Builder’s Risk Insurance?

Though it’s a much-needed type of insurance when building a house, it has a few limitations too. One of such limitations is that it does not provide coverage for any kind of bodily injury. 

Instead, bodily injury is within the scope of general liability insurance (for the client and the general public) and workers' compensation coverage (for the workers.) Both of these insurance types are purchased by the general contractor.

Furthermore, though builder’s risk insurance covers some tools and equipment, the scope of this can vary. Some policies don’t include this at all. When in doubt, check your insurance documents or ask your insurance provider.

Lastly, another common limitation in some builder’s risk insurance plans is that they, in some cases, do not have automatic coverage for floods and earthquakes. In most situations, however, these can be added as endorsements.

A Customized Builder’s Risk Insurance Policy For Your Project

That wraps up our article on building insurance and builder’s risk insurance. If you’re planning to construct a house and you’re looking for a builder’s risk insurance plan that will protect your project, we’re here to help!

Whether you are a project owner (future homeowner) or a general contractor, KASE Insurance can assist you in getting the right insurance when building a house.

Get started today by reaching out to us or by obtaining a FREE quote!

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