The Odd Cases: Vacant Lots, Half-Built Houses, Spec Builds and Insuring Before the Permit

Construction Insurance

The Odd Cases: Vacant Lots, Half-Built Houses, Spec Builds and Insuring Before the Permit

Most of this section assumes a normal job: a lot, drawings, a permit, a builder. Plenty of real projects do not look like that. A bare lot and nothing else. No drawings yet but the lender wants a number. A permit stuck at the township while the policy clock runs. Somebody else’s half-finished house, or a house you are building to sell. Each changes what the insurer is being asked to cover, and each has a trap.

Ontario rules and Canadian sources checked November 2026. Where no Canadian figure exists we say so instead of inventing one.

A Vacant Lot Is Not Nothing

You bought the lot, you are not building for a year, so what is there to insure? There is you. Under Ontario’s Occupiers’ Liability Act, the person in control of a property owes a duty of care to people who come onto it. A kid off a dirt bike on the old well cap, a neighbour’s dog down the geotech’s test pit: those claims come to the owner of the dirt.

Liability on bare land is cheap, often an extension of your home policy. We found no published Canadian premium for it, so we will not print one; ask for $2,000,000. Tell the insurer what is on the lot: an old foundation, a shed, a dock, material delivered early. Material on a lot with no construction policy is lumber in a field, and lumber in a field walks. The vacant land mortgage page covers what the lender wanted; the liability is separate and is on you.

Insuring Before the Permit: the Permit Is Not the Trigger

People assume the policy cannot start until the permit is issued. It can, and it should. A builder’s risk policy is bound on the plans, the budget, the address and the dates, not on a permit number. The trigger that matters is the first delivery or the first trade on site. The excavator stripping topsoil is construction; the permit on the township counter is paperwork.

So the order is: quote on the drawings, bind in writing before anything shows up, then start. Excavation and the foundation are covered from the bound date like any other stage. Digging before the permit is a problem with the township first, and an insurer may not forgive a claim that lands in that window either. The permit page covers what needs one.

No Final Drawings? You Can Still Get a Number

You cannot bind a policy on a napkin, but you can get an indicative quote on one. A broker can give you a budget number from the hard construction cost excluding land, the square footage and storeys, the wall type, the address and its distance to the fire hall, whether there is a hydrant, who is managing the build, and the dates. That is a quote, not a policy; it gets re-rated when the real drawings and the signed contract land.

StageWhat you give the brokerWhat you get back
Sketch and budgetBudget hard cost, sq ft, storeys, wall type, address, fire hall distance, who managesIndicative premium, not binding
Final drawings and contractDrawings, signed contract, schedule, lender name, GC’s liability certificate, trades list, securityA bindable quote with the form, deductible, term and endorsements spelled out
Our planning number, budget stage0.9% of hard cost, call it 1%$500,000: $4,500; $1,000,000: $9,000
Top of the published range4% of hard cost$500,000: $20,000; $1,000,000: $40,000

November 2026. The 0.9% line is our middle planning number inside the published range; the 4% line is the top of that range, not our estimate. The cost page works the examples through at 0.5, 0.9 and 1.5 percent.

Why insurance prices are all over the map: the brokerages, insurers’ guides and lenders we checked quoted very different numbers for the same house. An Ontario and Quebec brokerage and a Canadian renovation marketplace put the premium at 0.5% to 1% of completed value; two Ontario brokerages and a Canadian comparison site said 1 percent to 4 percent; a US site went to 5%. On a $500,000 house that is $2,500 at one end and $20,000 at the other. The spread is percent of hard cost versus a flat minimum, term, deductible, construction type, fire protection grading, and soft costs and liability in or out. Budget about 1% of hard cost, about $4,500 on a $500,000 house, and get two or three quotes on the same written description of the build.

The lender wants the policy at the full appraised completion value, not your early hard-cost guess; the mortgage requirements page explains how to reconcile them.

Buying Somebody Else’s Half-Built House

A partially completed house comes up for sale for one of three reasons: money ran out, a marriage ran out, or the builder ran out. The application asks what percentage of the budget has been spent, whether there are liens, and whether insurance has ever been refused or cancelled. Answer straight. Anything you fudge here can void a claim later.

You need a new policy from the day you take title, written on the completed value. The previous owner’s policy does not follow the property. Damage that was there before your policy started is not your insurer’s problem, so get an engineer or an experienced builder through it before closing and photograph everything. Find out who started it. A licensed builder means a Tarion enrolment to ask about; an owner-builder means no warranty and an Owner-Built Home Acknowledgement on file at the township. The Tarion vs insurance page sorts out what the warranty can and cannot do for you here.

Building to Sell Is a Business, and Insurers Price It That Way

If you are building a house to sell, you need an HCRA licence; the owner-builder exemption only applies if you do not sell the home after construction, and the home has to be enrolled with Tarion. Your insurance is no longer a homeowner’s course-of-construction policy either. You are a vendor and a builder, and the insurer rates it as a commercial contractor’s risk: your own general liability, with a $2,000,000 floor and $5,000,000 common on bigger jobs, plus the builder’s risk, plus WSIB for anyone on payroll.

The second trap is the end of the build. Builder’s risk ends at completion or occupancy, and a finished house with a For Sale sign is neither under construction nor occupied. Most home policies treat a house as vacant after 30 consecutive days, and vacant-home insurance can run to three times a normal premium, according to a national brokerage. Ask before completion whether the builder’s risk can be extended over the sale period, and what a vacant dwelling policy costs if not.

When the Clock Runs and Nothing Happens

Policies are written for 3, 6, 9 or 12 months, and the premium is for the term, not for the work done. Bind in April for a May start, get the permit in August, and three months of coverage are gone while the house is not. Two honest options: call the broker before the start date and ask to move the effective date; or carry on and budget for the one extension that is usually granted at an additional premium.

A winter shutdown is a smaller version of the same problem: the policy generally stays in force while work is stopped, but tell the insurer the site is idle, keep it secured, and watch the term date. We build houses and carry these policies on every one of them; we do not sell insurance, and the binding answer on any of this comes from a RIBO-licensed broker.

  1. Bind on the plans, before the first delivery. The permit is not the trigger; the truck is.
  2. Watch the term, not the calendar. Delays eat coverage; move the date or budget the extension.
  3. A finished empty house is a vacant house. Plan the sale period before the policy ends.

This is general information from a builder, not insurance, legal or tax advice. Policies differ; confirm your situation with a RIBO-licensed broker and your lender. The construction insurance hub has the three policies and who carries each.

Questions people ask

Can I insure a house before obtaining a building permit?

Yes. A builder’s risk policy is bound on the plans, the budget, the address and the dates, not on a permit number. Some insurers may still ask for the permit, or proof you have applied for it, so ask the broker what the form requires. What you cannot do is start work before the policy is bound, or dig before the permit.

Do I need insurance for a vacant building lot?

Liability, yes. The Occupiers’ Liability Act puts a duty of care on the person in control of the land, so an injury on your empty lot is your claim. It is cheap, often added to your home policy, and we found no published Canadian figure; ask for $2,000,000. Material delivered early needs the construction policy, not lot liability.

Does builder’s risk insurance cover excavation and foundation construction?

Yes, from the bound date forward, like every other stage. Excavation is construction, which is why the policy has to be in force before the excavator arrives, not after the foundation is poured. Flooding of an open excavation from overland water is usually excluded or an endorsement, so ask about it on a wet lot.

Can I extend builder’s risk insurance if construction is delayed?

Usually once, at an additional premium. Policies are written for 3, 6, 9 or 12 months and an Ontario brokerage we checked says one extension is usually granted. Ask before the term ends, not after. If the delay comes before work starts, ask whether the effective date can be moved instead.

Can I insure a partially completed home purchased from another owner?

Yes, with a new policy from the day you take title, written on the completed value. The seller’s policy does not transfer. Expect questions about percent of budget spent, liens and prior refusals. Damage from before your policy started will not be paid, so inspect and photograph before closing, and check who started the house.

Does building a house for resale require different insurance?

Yes. A spec build is a commercial risk: you need an HCRA licence and Tarion enrolment, your own general liability at a $2,000,000 floor, builder’s risk on the house, and WSIB if you employ anyone. The finished house waiting for a buyer is vacant after 30 days under most policies, so arrange that period before the construction policy ends.

Can I obtain builder’s risk insurance without finalized building plans?

You can get an indicative quote on a budget, a sketch, the address, the wall type and the dates. You cannot bind on it. The bindable quote waits for drawings, the contract and the lender’s name. Treat it as a budget line that will move.

Get a planning number before the drawings are done

The free calculator takes a budget hard cost, a wall type, the fire hall distance and whether a licensed builder is running the job, and gives you a planning range plus a quote request sheet for a broker of your own choosing.

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Sources and further reading