Venturing into the world of construction insurance may seem complex at first glance. Whether you're a contractor, business owner, or homeowner looking to protect yourself, you have to understand the different options available. From builder’s risk insurance to liability insurance, every inch of your construction project can be covered. With a well-established strategy, your sanity is ensured. Learn how to insure your home during a renovation project and how civil liability insurance can serve you.

Who is responsible for insuring a house under construction in Quebec? 

The construction industry is shaped in such a way as to protect the buyer. When selected contractors are law-abiding (RBQ-licensed and accredited), the buyer is automatically covered by the Garantie de construction résidentielle (GCR – residential construction warranty). We’ll detail what said warranty covers below. 

Therefore, a home under construction will be primarily insured by the contractors in charge of the worksite. In the next part, we’ll detail the insurance they’re required to have.

To prevent inconveniences, here are two worthwhile pointers: 

• Reach out to the hired contractor’s insurance provider;

• Ask to be kept updated in case any changes are made to the policy.

Why? Because, believe it or not, contractors have, in the past, altered their insurance policies midway through fully operational worksites. The best course of action is to add your name to the insurance policy as the parcel owner. 

Also, as a way to ensure you’re protected on all fronts, you can take out builder’s risk insurance through your homeowner’s insurance. This allows you to take out insurance on the worksite yourself, while also having a copy of the policy. Read on to better understand how different insurance policies entwine.  

Must-Have Insurance for Construction Companies

Builder’s Risk

Builder’s risk insurance doesn’t solely fit in with property insurance. The truth of the matter is that it has several different tiers: 

• “All-risk” builder’s risk insurance (property insurance)

• Wrap-up liability insurance

These insurance policies cover damages relating to the following: 

• Fire

• Lightning

• Theft (other than by an employee)

• Vandalism

• Explosion

• Water damage 

A builder’s risk insurance policy can either be general or specific. This means that the head of a construction company can choose the same insurance policy to cover similar construction worksites throughout their work year. However, they can also decide to acquire insurance tailored to the specificities of a specific construction worksite. 

The overall cost of “all-risk” insurance isn’t only tied to the claims’ history but also professional experience: 

• Builder

• Owner

• Project manager

• Primary worksite contractors  

An “all-risk” insurance policy is eligible from the start of the project until it wraps up. For bigger construction projects, the responsibility of acquiring a builder’s risk insurance policy doesn’t solely rest on the construction company’s shoulders. The union must also get third-party insurance. As such, if damage is sustained, both parties are compensated.

However, it doesn’t include liability, which is a separate component altogether. 

Wrap-Up Liability Insurance

This is general civil liability insurance for contractors. The latter is acquired by one of the following: 

• General or specialized contractors

• Subcontractors

• Worksite professionals 

Such insurance covers the above-mentioned industry professionals from bodily injuries and material damage caused by others, on a yearly basis. For example, a contractor can choose to purchase a 5-million-dollar policy, splitting it amongst all their projects. 

Also made available through wrap-up insurance policies are coverage extensions, named as such based on the fact that civil liability insurance covers all parties involved with the construction project:

• Work provider

• Owner

• General or specialized contractor

• Subcontractors

• Employees 

As such, when third-party damage occurs, resulting in the involvement of several different businesses, said insurance policy will take over without seeking to determine the degree of responsibility of each party. 

Better yet, wrap-up liability insurance also includes an additional period for “completed operations.” For a period of 12 to 24 months, said policy covers all potential interventions done post-delivery. 

What about adjacent risks? The “wrap-up” tier also considers the risk of damaging a neighbouring foundation, metro line, or an adjacent heritage property. 

Despite everything, these two insurance tiers don’t provide complete protection. Hence why construction companies often seek out other protection policies, such as construction equipment breakdown insurance.

Construction Equipment Breakdown Insurance

Builder’s risk insurance policies don’t cover, or rarely so, equipment breakdown. A motor goes idle, something short circuits and delays workers, or an operator makes a mistake, these are all risks that are just as worth covering. Yet, builder’s risk insurance doesn’t cover equipment damage. Most builder’s risk insurance policies refuse to cover claims related to: 

• Extreme temperatures

• Dusty environments

• Improper equipment installation

• Equipment removal or replacement

Having valid equipment breakdown insurance during the entire construction process guarantees not only all the above-mentioned risks are covered, but also the following claims: 

• Damage caused by an electric arc

• Mechanical breaks

• Overvoltage

• Start-ups and testing (if mentioned in the policy’s appendix)

Such insurance can very well turn out to be indispensable for large-scale projects.

Therefore, if you’ve acquired all these insurance policies (property insurance, wrap-up insurance, and construction equipment breakdown insurance), you may think that you’re covered in case anything happens, hindering the progression of your project. But, the truth of the matter is, that’s still not the case. 

Such insurance policies exclude the following claims: 

• Freeze

• Employee theft

• Delay-related penalties regarding polluting materials 

As a result, oftentimes, insurance companies suggest adding clauses, maybe even separate contracts, covering damages caused by the following: 

• Polluting materials

• Sewer back-ups

• Earthquakes 

Must-Have Private Warranties

The Garantie de construction résidentielle

The GCR (residential construction warranty) is a non-profit organization that thrives to provide a warranty for new residential buildings built within the province (single-detached homes, buildings with two to five units, and co-ownership properties with up to four private and superimposed units).

This type of warranty protects homeowners purchasing newly built homes or in the process of building properties. Said warranty covers: 

• Downpayment protection (up to $50,000)

• Delivery delays

• Defects (up to one-year post-delivery)

• Latent defects (up to three years post-delivery)

• Faulty design or construction (up to five years following the project’s completion) 

• Subsurface defects (new buildings subject to mandatory warranty plan) 

For example, addressing hidden defects and construction defects following the completion of the project is covered by up to $300,000 for single-detached homes and $200,000 for multi-unit buildings. However, the quintuplex is the exception, with a $1,000,000 coverage. 

To benefit from the GCR, you not only have to approve the work in under 24 months after the project’s completion but also select registered interveners listed in the GCR’s accredited businesses directory. 

Courtesy of this directory, you have access to a lot of company-based information, such as: 

• RBQ licence number

• The number of worksite non-conformities detected over the past two years

• Every liability found on each worksite

• Types of hidden defects and construction defects

• Every address to all structures built by the company (if registered with the GCR) 

Since this warranty plan is mandatory, you have every right to it for each new construction, provided that:

• the chosen contractor is GCR-accredited; and

• said contractor holds a valid, RBQ-issued licence under subclass 1.1.1 or 1.1.2.

Otherwise, the contractor is infringing the law, and you’ll be left uninsured. 

To ensure your downpayment is reimbursed should anything adverse happen, remember to request proof of such payment from the contractor, and hold on to it in case any issues arise. 

Furthermore, the main advantage of the GCR, in terms of delivery delays, is that you can benefit from $6,000 for temporary rehousing, property storage, or moving purposes.  

Get Home Insurance for a Self-Build Project

Are you looking to carry out a DIY construction project? If so, go through an insurance provider, get the necessary pointers, and purchase the best owner-occupant insurance policy there is. 

If you already own one, don’t assume, from the get-go, that you’re automatically covered for self-build projects. Call your insurance provider, and inquire as to whether such clauses are stipulated or not in your insurance policy. The construction industry is complex, and certain insurance providers are reluctant to offer such policies. 

Another important factor is the project’s duration. Most insurance policies limit said time frame to six months. Beyond that, insurance companies refuse to cover you. Consequently, plan your project accordingly and work solely with Régie du bâtiment-licensed contractors. 

A good insurance policy covers: 

• Worksite accidents

• Construction damage

• Subcontractors

• Volunteers

• Civil liability 

Much like the insurance policies we discussed in the first part of this article, several factors can be excluded from said insurance policies, such as damage caused by: 

• Freeze

• Fire

• Theft and attempted theft

• Water damage

• Vandalism 

Considering that all policies can include additional clauses, the last two points disclosed are often omitted by insurance providers during self-build projects. However, you're just as likely to face such damage, and we’ll explain why in the next part.

But first, remember to get yourself a two-tier civil liability insurance policy. The first tier protects you from third-party damage, while the second tier protects your loved ones and friends in the event they're injured on-site. 

What sort of claims can you make mid-construction project? 

Based on the type of insurance purchased, here are the most common claims made on Quebec construction sites:

In light of the above-mentioned figures, while not having fire insurance is a limited risk, the fact that self-build insurance doesn’t cover the risk of water damage is a genuine issue. Indeed, said risk has the highest odds of occurring. 

Consequently, if you’re absolutely set on building your house yourself, note that you’re exposing yourself to the likelihood of water damage occurring. As such, budget accordingly. Here still, your insurance provider or broker may advise you on the cost incurred from such damage.  

What type of insurance to get when building a house?

To wrap up this article, let it be said that the contractor can acquire four-tier builder’s risk insurance: 

• Tier 1: Property insurance 

• Tier 2: RCG insurance 

• Tier 3: Wrap-up insurance

• Tier 4: Construction equipment breakdown insurance

On the homebuyer’s side, they don’t need to purchase any kind of insurance. Their new home automatically falls under the GCR warranty, provided that they hire qualified and licensed contractors.

However, when it comes to self-build projects, you must purchase owner-occupant insurance that covers specifically this sort of construction project.