What you need to know when renovating or building a house, farm or other outbuildings.
Whether a building is being newly constructed, substantially renovated or repaired, it is important to make sure it has the right property insurance before work starts.
Building construction insurance is designed to cover property during the course of construction and can be purchased by either the property owner or contractor, depending on the agreement made.
Most property insurance policies will exclude or void coverage if major renovations or construction above a certain threshold is not fully or properly disclosed in advance. There are additional risks and responsibilities characteristic of this type of work, which a typical property policy is not designed (or priced) to cover.
If the building is being constructed for your use:
- You must insure to 100 per cent of the completed value of the house.
- There will be a minimum deductible of $500 except for theft, which carries a $1,000 deductible.
- A Builder’s Risk policy is issued for a six-month term. If construction is not complete at that point, you must provide reasons for the delay in construction and an extension can be requested for additional premium.
- Builder’s Risk coverage ceases the earlier of:
- the completion date of the building;
- the date the owners move in; or
- the expiry date of the policy.
- Once the building is completed, your Broker can convert to regular coverage (Homeowner’s Package, Barn or Outbuilding coverage). If the policy remains with our Company, then any unused premiums from the Builder’s Risk policy will be refunded on a pro-rata basis. Otherwise, premium will be fully retained by your insurance company.
- Liability coverage means Comprehensive Personal Liability, which provides, among other things, coverage for personal liability for your actions and Premises liability for the building being constructed and the land it sits on.
- If you already have a Homeowner’s or Tenant’s package in place, then the personal liability can be extended for the new location. If there is no policy in place, then the Comprehensive Personal Liability will be added to the policy.
- IMPORTANT: If you are acting as your own general contractor, you will want to purchase owner’s construction liability coverage to protect you against claims for bodily injury or property damage arising out of actions by you or your employees (subcontractors and others you hire) with respect to the project.
Make sure you ask your Broker about any limitations that the policy may have.
If you are a contractor:
When purchasing construction insurance, one of the issues often overlooked is the policy period. Building policies provide coverage for property during the course of construction, renovation or repair. But at what point does construction renovation or repair actually begin?
- Typically, contracts require that building construction insurance be provided for the duration of the contract period.
- The lender may specify the inception date.
- Review the building construction policy provisions to determine if there are restrictions on when coverage begins.
Determining when coverage terminates can be equally problematic. Building construction policies can contain provisions that terminate coverage prior to policy expiration. These provisions typically state that the insurance will end at the earliest of one the following:
- The policy expires or is cancelled
- The property is accepted by the purchaser
- Your interest in the property ceases
Look for coverage with your insurance company that provides:
- Premises liability
- Employees as Additional Insureds
- Employer’s liability
- Voluntary compensation
Careful planning will lay a strong foundation for your construction, renovation or major building repair project. But the very best way to find out what you need to be covered before you break ground is to talk to your insurance company or Broker.
Remember! Keep your Broker up to date on any changes you are making to your home or business to ensure you are properly protected.