Builder's Risk Insurance

Builder's Risk insurance, also called Course of Construction insurance, covers a building under construction or major renovation against losses such as fire, theft, vandalism, and weather damage during the build period. In BC, lenders financing new construction or substantial renovations typically require this coverage as a condition of the construction loan or mortgage advance. The policy remains in force until substantial completion, at which point a standard home insurance policy must be arranged to replace it. Buyers and owners should confirm the lender's specific requirements before construction begins.

A Builder's Risk policy generally ends at substantial completion of the project, which is the point at which the building is ready for its intended use even if minor work remains outstanding. To avoid a gap in coverage, the owner or their insurance broker should coordinate the start date of a standard home insurance policy to take effect no later than the moment the Builder's Risk policy expires. Failing to arrange this handover carefully can leave the property uninsured for fire, water, or liability claims during the transition period. Owners should confirm the exact substantial completion date with their contractor and insurer in advance.

Neither the BC Building Code nor a specific BC statute universally mandates Builder's Risk insurance for every new construction project; the obligation most commonly arises contractually from lenders or from the terms of a construction contract. However, lenders advancing draws on a construction mortgage in BC almost universally require proof of Builder's Risk coverage as a condition of each draw. Owners should also review their general contractor's contract, as many standard construction contracts in BC include insurance requirements for the owner and contractor alike. Consulting the current lender's conditions and the contract documents is the appropriate starting point.

Under the Strata Property Act (SBC 1998, c. 43) and its Regulation, a strata corporation is required to obtain and maintain property insurance on the strata buildings and common property. When a strata lot owner undertakes a major renovation that constitutes new construction within their unit, the owner is generally responsible for arranging their own Builder's Risk policy to cover that work, since the strata corporation's policy typically excludes construction-phase risks or improvements made by individual owners. The strata corporation's bylaws may also impose specific insurance requirements or approval conditions before renovation work commences. Owners should review the strata corporation's bylaws and insurance schedule, and consult their insurer, before beginning any significant renovation.

Under the Real Estate Services Act (RESA) and the rules administered by the British Columbia Financial Services Authority (BCFSA), a licensee acting for a buyer has a duty to disclose all known material latent defects and information material to the transaction. Whether Builder's Risk coverage is in place and when it will transition to standard home insurance is information that can be material to a buyer's financing and risk exposure, and a diligent licensee should bring this to the buyer's attention. Licensees should not provide insurance advice but should direct clients to a qualified insurance professional to confirm coverage is in place at the time of completion. BCFSA's conduct standards require licensees to act in the best interests of their clients throughout the transaction.

Many Builder's Risk policies available in BC can be structured to include coverage for building materials stored off-site or in transit to the construction site, but this extension is not automatic and depends on the specific policy wording negotiated with the insurer. Owners and builders should explicitly request and confirm off-site materials coverage, particularly for high-value items such as custom millwork, windows, or mechanical equipment ordered in advance. Without this extension, materials stored at a supplier's yard or en route to the site may be uninsured under the Builder's Risk policy. Reviewing the policy schedule carefully with an insurance broker before materials are ordered is advisable.

Under the BC Property Transfer Tax Act, a transfer of a newly built home may qualify for the Newly Built Home Exemption from Property Transfer Tax, with the full exemption applying to eligible properties up to a fair market value of $1,100,000 as of 2026. Builder's Risk insurance status does not directly affect PTT eligibility or the Newly Built Home Exemption; eligibility is determined by the property's use, value, and the buyer's circumstances under the PTT Act. However, substantial completion—the point at which Builder's Risk coverage typically ends—can be relevant to establishing the fair market value and occupancy status of the property for PTT purposes. Buyers should consult the BC Ministry of Finance or a qualified tax professional for guidance on their specific PTT situation.

On an owner-builder project in BC—where the owner obtains an owner-builder authorization under the BC Building Act and manages the construction themselves—the responsibility for arranging Builder's Risk insurance rests with the owner, as there is no general contractor to whom that obligation can be assigned. The construction lender will typically require proof of an active Builder's Risk policy before releasing any construction loan draws. Because the owner is acting in the role of both client and builder, they should ensure the policy adequately covers the full replacement cost of the structure at each stage of construction, including materials on site. An insurance broker experienced in construction coverage can assist in structuring appropriate coverage for an owner-builder scenario.

Standard Builder's Risk policies in BC are designed to cover sudden and accidental physical loss or damage from insured perils such as fire, theft, vandalism, and weather, and they typically exclude the cost of correcting defective workmanship, faulty design, or defective materials themselves. The resulting damage caused by a construction defect—for example, water damage to finished work following a defective roofing installation—may be covered depending on policy wording, but the defective work itself is generally not. New home warranty coverage under BC's homeowner protection framework addresses construction defects separately from Builder's Risk insurance. Owners should review both their Builder's Risk policy and their new home warranty documentation to understand how each type of loss is addressed.

Builder's Risk policies in BC are typically issued for a defined policy period based on the anticipated construction timeline, and if the project is delayed beyond that period, the owner must apply to extend or renew the policy before it lapses to maintain continuous coverage. Allowing the policy to expire without extension while construction is ongoing creates an uninsured gap that would expose the owner and lender to significant financial risk. Lenders may treat an expired Builder's Risk policy as a default condition under the construction loan agreement, potentially halting further draw advances. Owners should notify their insurer promptly of any delays and confirm the extended coverage is in place before the original policy expiry date.