Construction Insurance: It Is Not As Difficult As You Think

No single law says you must buy one specific construction insurance policy, but in practice insurance is unavoidable on a real build. If you are financing any part of the project, your lender will require builder's risk coverage as a condition of advancing funds, and no bank will fund a build without it. Separately, WSIB coverage is mandatory under Ontario law for virtually all construction businesses, so the people working on your home are covered. And if a third party is injured on your site or a neighbour's property is damaged, you can be sued for negligence, which is exactly what general liability insurance exists to handle. So while there is no single statute saying buy this policy, the combination of lender requirements, WSIB law, and your own liability exposure means that going without coverage is not a realistic option. The practical answer is that a new build in Ontario needs builder's risk, general liability, and WSIB, and you should confirm in writing who carries each one before work starts.

Builder's risk insurance, also called course of construction, protects the home itself while it is being built, covering direct physical damage from perils such as fire, lightning, windstorm, hail, theft of materials, and vandalism. A broader all-risk version covers everything except stated exclusions and costs more, though it is usually not required to satisfy a lender's minimum. Lenders generally require the policy to cover at least one hundred percent of the home's value or the full construction loan amount set on the appraisal. As a 2026 ballpark, builder's risk runs roughly one to four percent of the total construction value, so a fifty thousand dollar project might cost five hundred to two thousand dollars to insure, and a larger custom home scales up from there depending on build duration, construction type, site security, and location. It does not provide liability coverage or protect personal belongings, since there typically are not personal possessions on a construction site. On a lot you already own, carrying builder's risk is usually the homeowner's responsibility rather than the builder's.

In most cases, yes. Under Ontario's Workplace Safety and Insurance Act, WSIB coverage has been mandatory for virtually all businesses in construction since January 2013, and the expanded compulsory coverage reaches beyond companies with employees to include independent operators, sole proprietors, partners, and executive officers. So if your builder has any crew helping construct your home, WSIB is required. There are narrow exemptions, such as an independent operator performing certain home-renovation work directly for the homeowner who lives in the home, and a builder who truly has no workers and subcontracts everything may sign a letter confirming they are not required to carry it. On a genuine custom build with trades on site, though, you want coverage in place, because if a worker is injured without proper coverage they can potentially pursue both the contractor and the homeowner for damages. The way to verify it is to ask the builder, and every subcontractor, for a WSIB clearance certificate before any work begins, and to refuse to let work proceed without that proof.

Either party can carry general liability insurance, but it should be settled clearly and in writing before work begins, because it determines who is protected if a third party is hurt or their property is damaged because of the job site. When a reputable builder provides it, you can expect a comprehensive general liability policy of one to two million dollars or a broad-form liability endorsement, and any good builder will usually carry coverage for all potential accidents. The reason this matters so much for an owner-builder is that you are legally responsible for conduct and damages on your own job site and can be sued for negligence. A general contractor solves this through their own commercial liability policy, but an owner-builder has to purchase a commercial policy directly, which is often expensive and harder to obtain. The simplest protection is to ask your builder up front whether they carry general liability and to request the certificate, because a builder who cannot or will not provide it is quietly shifting that exposure onto you.

Sometimes, but you should never assume it. A minority of homeowners are fortunate enough that their insurer will extend their standard homeowner's policy to cover the home during construction, including some protection against theft of building materials, but many standard policies exclude or sharply limit coverage for a home that is vacant or under construction because the risk profile is so different from a finished, occupied house. A half-built home full of lumber, open framing, and a changing cast of trades is exactly the situation standard policies are not designed for. The only safe approach is to call your insurer before the first load of materials arrives, explain that the home will be under construction, and get the answer in writing, including what is and is not covered and for how long. If your existing policy does not extend, that is precisely the gap builder's risk insurance is meant to fill, so line it up early rather than discovering the exclusion after a loss.

An owner-builder takes on the responsibilities a licensed builder would normally carry, which makes the insurance picture more demanding. You are responsible for arranging WSIB coverage for the people on your site, obtaining your own general liability insurance, carrying builder's risk on the structure, pulling every municipal permit for each stage of construction, and contracting directly with subcontractors and suppliers. Because you are legally responsible for conduct and damages on the job site, you generally need a commercial general liability policy, which is more expensive and harder to obtain than a contractor's existing coverage. There is also a major consequence that has nothing to do with insurance premiums: an owner-built home is not eligible for warranty coverage under Ontario's New Home Warranties Plan Act, so it will not have Tarion statutory warranty protection. That means if a structural defect appears after the build, there is no warranty backstop. For many people, hiring an HCRA-licensed, insured, Tarion-enrolled builder is the cleaner and safer path precisely because it transfers most of these obligations to a professional.

Four questions cover most of what can go wrong. First, are you licensed by the Home Construction Regulatory Authority, since in Ontario it is illegal to build or sell a new home without an HCRA licence. Second, will you provide a certificate of general liability insurance, typically one to two million dollars, so you can confirm third-party coverage is real and current. Third, do you carry WSIB, and can I see a clearance certificate, which confirms the account is in good standing and protects you from worker-injury claims. Fourth, who carries builder's risk on this build and for what amount, so the structure is protected and your lender's condition is met. It is also worth confirming that the home will be enrolled with Tarion for new-home warranty protection. A reputable, fully insured builder will answer all of these without hesitation and provide the paperwork, and a builder who hesitates or cannot produce certificates is showing you the risk before you have signed anything, which is the best possible time to learn it.