Builder’s Risk vs Your Home Insurance: Why One Will Not Do the Other’s Job

Two Policies, Two Jobs

Think of the house under construction as a job site and the finished house as a home. Insurers do, and they write different paper for each. A builder’s risk policy covers the structure as it grows and the material waiting to go in, and expects the place to be empty. A home policy covers a completed, occupied dwelling and the contents of the people living in it, and it assumes a locked door, a working furnace and somebody who notices a leak.

We build houses and carry these policies on every one of them; we do not sell insurance. The binding answer on any policy comes from a RIBO-licensed broker. What a builder can tell you is where homeowners fall through the crack between the two.

Why Your Home Policy Walks Away From a House Under Construction

A standard Ontario home policy has two clauses that matter here. One excludes or limits loss while the building is under construction. The other treats the home as vacant after 30 consecutive days with nobody living there, and ends or strips back coverage unless you have bought a vacancy permit. A new house on a bare lot fails both tests on day one: an open frame is kindling with no door to lock.

There is a wrinkle for renovations. An Ontario Court of Appeal decision held that a renovation is not automatically “under construction” for that exclusion; it depends on the facts of the job. Good news if you are replacing a kitchen, bad news if you want certainty. Get the insurer’s position in writing before the first wall comes down.

The practical result: a new house needs builder’s risk from before the first delivery to the day you move in. A house you live in and are tearing into needs either an endorsement on the existing policy or a stand-alone course-of-construction policy, with the insurer told before work starts. The builder’s risk page explains what the construction policy covers and excludes.

The Switch at Occupancy, and the Gap Week

Builder’s risk ends at the earliest of expiry, completion or occupancy. Home insurance begins when it is bound. Those two dates are supposed to be the same day. In practice there is often a week between them, with the movers, the painters and your brother-in-law with a trailer in and out of an unlocked house. We call it the gap week; nothing is covered during it.

The gap opens two ways. Either the home policy is not bound because the insurer wants an inspection, an occupancy permit or a civic address first, or the builder’s risk has already expired because the build ran long and nobody asked for the extension. Both are fixable in advance and neither is fixable after a loss.

1. Call the home insurer six weeks before the move. Some want to inspect the finished house; some want the occupancy permit; some want both.
2. Bind the home policy to start the day before you sleep there. One night’s overlap costs almost nothing. One night’s gap costs the house.
3. Check the builder’s risk expiry against the real schedule at every draw. If the move slides, extend before expiry, not after.
4. Tell the lender the dates. The construction mortgage converts around the same time and the lender wants the new certificate; the construction mortgage page covers that paperwork.

Moving In Before the Work Is Done

Everybody wants to. The lease is up, the kids start school, the house has a working bathroom, and the trim can be done around you. The problem is the word occupancy. On most builder’s risk forms the night you first sleep in the house is the night the policy stops, and the trim carpenter working around you on Monday is in a house with no construction coverage and, if you have not bound it, no home coverage either.

There are two honest ways through. Bind the home policy before you move in and have the insurer note, in writing, that finishing work continues; some accept that for interior finishing by licensed trades, some say no until the occupancy permit is issued. Or ask the construction insurer, in writing, whether partial occupancy is permitted for a stated period; some forms allow it by endorsement, many do not. What you cannot do is move in quietly and hope. A loss during undeclared occupancy is the kind of thing adjusters hear about from the neighbours.

The municipal side is separate. Moving in before the occupancy permit is issued is a problem under the Building Code (O. Reg. 163/24) and your municipality, and the insurer may ask for the permit as a condition of the home policy.

Renovating: an Endorsement or a Stand-Alone Policy

If the house you are working on is the house you live in, you have a choice the new-build owner does not. For a kitchen, a bathroom or a finished basement, most insurers will endorse the existing home policy to acknowledge the work, provided you tell them first. For an addition, a second storey or anything that opens the envelope, many say they cannot keep a home policy on the house during the work and point you to a course-of-construction policy.

The two are not interchangeable. An endorsement keeps your home policy whole, contents and liability included, and adds the renovation at a modest extra premium; read what it takes away, because one Canadian insurer’s wording drops vandalism, glass breakage and water damage while the work goes on. A stand-alone builder’s risk covers the new work on an all-risk basis but covers only the construction, so contents and liability still need the home policy. On an addition that is normal. On a kitchen it is overkill.

Either way, tell the insurer before the contractor’s first day. Coverage can be voided for a major renovation the insurer was not told about, and the 30-day vacancy clause applies whether or not the reason you are out is a renovation. A trailer in the driveway while the house is gutted has counted as moved out in a Canadian court. The renovation insurance page covers additions, second storeys and basements, and the home insurance page covers the finished-house policy.

Defects After You Move In Are Not an Insurance Claim

Six months after possession the hardwood cups, a window leaks at the sill, the basement wall shows a crack. Neither policy pays for that. Builder’s risk is over; home insurance excludes faulty workmanship, design and material, and excludes settling, shrinkage and seepage besides. It was never an insurance question.

On a house built for you by a licensed builder, that is what Tarion is for: the statutory warranty on work and materials after possession, up to its limits. On an owner-built house there is no Tarion, and the remedy is the contract with each trade. If the defect causes sudden damage, say the leaking window soaks the subfloor in one storm, the home policy generally pays for the resulting damage and leaves the window to the warranty or the contract. The Tarion vs construction insurance page sorts out which paper covers which problem, and the construction insurance hub covers the three policies on a build and who carries each.

Overlap is allowed and sometimes smart. If you must err, err toward two tarps.

Last word, plainly: this is general information from a builder who has carried these policies on a lot of houses, not insurance, legal or tax advice. Policies differ, and the clause that matters is the one in yours. Confirm it with a RIBO-licensed broker and with your lender before you move a single box.

Questions people ask

Sources and further reading

• Ontario Court of Appeal on renovations and “under construction”: a trade-press report of the decision that a renovation is not automatically construction for a home policy exclusion.
• Insurance Bureau of Canada: types of home coverage: comprehensive versus named perils, standard exclusions, occupancy conditions and replacement cost.
• Tarion: building a custom home: contract homes on your own land, HCRA licensing, the $400,000 coverage, and how owner control can cost you the warranty.