A construction project sits outside the coverage most property and homeowner policies are designed to provide the moment real building work begins. That gap is why a builder's risk or course of construction policy exists: it is the property coverage built specifically for a structure, and the materials that go into it, while a project is underway. Anyone financing, managing, or building a project in Canada tends to run into this requirement early, often before the first permit is issued.
This article looks at one topic: what a builder's risk or course of construction policy is, what it typically covers, and who ends up responsible for buying it on a Canadian construction project. It does not cover the liability side of a construction program, such as commercial general liability or wrap-up coverage, which are separate policies with a different purpose.
What is a builder's risk or course of construction policy?
A builder's risk or course of construction policy is a property insurance policy that covers a building under construction, along with the materials and supplies used to build it, from the start of the project until it reaches substantial completion. The two names describe the same coverage; "builder's risk" is more common in some provinces and with some insurers, while "course of construction" (sometimes shortened to COC) is used interchangeably elsewhere in Canada.
The policy exists because a standard commercial property or homeowner policy is written around a finished, occupied building. Once a structure is stripped down for a major renovation or is only partly built, most of those standard policies restrict, exclude, or simply were never designed for that stage of the project. A builder's risk policy fills that gap for the length of the build.
What a builder's risk policy typically covers
A builder's risk policy is generally designed to cover the structure itself at every stage of construction, from the foundation through to finishing work, along with building materials and supplies while they sit on site, are in transit, or are held in temporary storage before installation. Common perils typically included are fire, lightning, wind, theft, and vandalism of materials before they are installed, along with water damage from sources like a burst line on site.
Several items often sit outside the base form and are added by endorsement rather than included automatically. The table below describes what a builder's risk policy is generally designed to include; coverage varies by insurer and by policy, and only the wording of an actual policy and a licensed broker can confirm what applies to a specific project.
| Coverage element | Typically in the base form? |
|---|---|
| The structure under construction | Typically yes |
| Materials on site, in transit, or in storage | Typically yes |
| Temporary structures, scaffolding, and formwork | Typically yes |
| Soft costs (loan interest, permits, design fees) | Typically added by endorsement |
| Delay in start-up (lost income after a covered loss) | Typically added by endorsement |
| Flood and earthquake | Typically added by endorsement |
Soft costs and delay in start-up: the endorsements that matter most
A covered loss part way through a project, such as a fire that damages framing already in place, does more than destroy materials. It can push back the completion date, which means loan interest keeps accruing, permits may need renewing, and a business waiting to occupy the finished space keeps waiting. Soft costs coverage is the endorsement built to address that side of a loss, typically extending to loan interest, real estate taxes, and design or engineering fees tied to the delay.
Delay in start-up coverage, sometimes called delayed opening coverage, works alongside soft costs and is generally designed to address lost income or added carrying costs for the period between when the project was originally expected to finish and when it actually does, once a covered loss is responsible for the gap. Neither endorsement is automatic, and both are worth raising directly with a broker rather than assuming they are already part of a quoted premium.
Who typically buys the policy, and how long it lasts
Responsibility for the policy generally follows whoever carries the risk of the project under the construction contract, which can shift depending on how the project is structured. On many projects that is the property owner or developer, while on others the contract assigns the responsibility to the general contractor. A lender financing the build is frequently named as loss payee and typically will not release construction draws without proof the policy is in place.
The policy term is usually matched to the estimated length of the project, running from groundbreaking through to substantial completion or occupancy. A project that runs past its original timeline typically needs the term extended before it lapses, since a builder's risk policy does not automatically continue past its stated end date the way an annual policy renews.
Benefits of a builder's risk policy
A builder's risk or course of construction policy gives a project a form of coverage that a standard commercial property or homeowner policy is not built to provide during an active build. It can support project financing directly, since a lender's requirement for proof of coverage before releasing funds is often one of the first insurance conversations a project encounters. Extending the policy with soft costs and delay in start-up coverage adds a layer of protection for the financial side of a delay, not only the physical rebuild.
It can also give the parties on a project, including the owner, the general contractor, and the lender, a shared, documented answer for how a covered loss during construction gets addressed, rather than leaving that question unresolved until a loss actually happens.
Where you'll come across a builder's risk policy
A builder's risk or course of construction policy typically comes up early: when a construction loan is being arranged and the lender's paperwork lists it as a condition of funding, when a general contractor's bid package specifies insurance requirements for the project, or when a permit application asks for proof of coverage before work can start. It can also surface mid-project if the scope changes significantly, such as a renovation that expands into a larger rebuild than originally planned, or when a project's timeline stretches and the policy term needs extending.
An owner-builder managing a custom home or a major renovation without a general contractor tends to encounter this requirement directly, since there is no contractor's policy to fall back on and the responsibility for arranging coverage sits with the owner from the start.
Talk to a licensed broker before the project starts
A builder's risk or course of construction policy is one piece of a larger insurance picture on any project, alongside the business insurance a contractor or developer already carries and the liability coverage that runs separately from it. Coordinating a project's course of construction insurance with its existing coverage, including how a waiver of subrogation or an additional insured endorsement tied to the project fits alongside it, is exactly the kind of detail worth confirming before the first permit is pulled rather than after a loss. Get a commercial insurance quote and have a licensed broker walk through what a specific project needs.
Coverage details vary by insurer and by policy, and only the wording of an actual policy and a licensed broker can confirm what applies to a specific situation.