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Who Pays for Builder’s Risk: Homeowner or Builder, and What the Contract Must Say
Construction Insurance
Who Pays for Builder’s Risk: Homeowner or Builder, and What the Contract Must Say
Your builder says you have to buy the builder’s risk policy. Your neighbour says his builder carried it. You are both right, because the question has no fixed answer in Ontario; it has a usual answer, and a contract clause that settles it. This page gives you both, plus what a certificate proves, how much liability a builder should carry, and who eats the deductible.
Lot Ownership Decides It Most of the Time
Builder’s risk, also sold as course-of-construction insurance, is property insurance on a house that does not exist yet. The party with the most to lose if it burns is the party who owns the ground under it, and that is who usually insures it. The Canadian sources we read agree, and add: settle who buys it before the project starts.
| Situation | Who usually carries builder’s risk | Who is named on it |
|---|---|---|
| You own the lot and hire a licensed builder (a contract home) | You, the homeowner | You as insured, the lender as mortgagee, the builder as additional insured |
| The builder owns the lot until closing (a spec home) | The builder | The builder and his lender; you have nothing to insure until you own it |
| You own the lot and build it yourself | You, with nobody to argue about it | You and the lender; see the owner-builder insurance page |
| Commercial contract on CCDC 2 with the CCDC 41 schedule | The contractor, unless the owner-insured supplement is used | Owner, contractor and subcontractors |
On our own builds it is settled in the contract before anyone starts. When the client owns the lot, the client usually carries the builder’s risk with the lender named on it. When we own the lot until closing, we carry it. Either way we carry general liability and WSIB on our own crew on every house. So when a builder tells you to buy the policy, he is not dodging anything; you own the asset, and your lender will want its name on the paper anyway. The construction insurance hub lays out all three policies and why none of them does another’s job.
What the Contract Clause Must Say
A contract that is silent on insurance assumes somebody else bought it, and the morning after a windstorm is a bad time to find out neither of you did. The clause does not need to be long; it needs to answer six questions.
- Who buys the builder’s risk policy, by name, and for what amount: the completed rebuild value excluding land.
- Who is named on it: the owner, the lender as mortgagee, the builder and subcontractors as additional insureds.
- When it starts and ends: bound before the first delivery, running to occupancy or completion, and who pays for an extension if the schedule slips.
- Who pays the deductible, and whether the party that caused the loss pays it.
- What the builder carries himself: commercial general liability at a stated limit, WSIB in good standing, his own tools on his own floater.
- Proof, and when: certificates exchanged before work starts, renewals delivered before expiry.
Commercial contracts have a standard answer in CCDC 41, used with CCDC 2 2020: the contractor carries $10,000,000 liability and property insurance at 1.1 times the contract price with a builders risk deductible capped at $10,000; where the owner prefers to insure, an owner-insured supplement moves the builders risk over. Residential custom-home contracts are far simpler. Read the insurance clause before you sign; if there is none, write one. The good contract page and the questions before signing cover the rest of the document.
The Certificate Is the Receipt; the Policy Is the Groceries
A certificate of insurance is a one-page summary a brokerage issues to say a policy exists: insurer, policy number, type of coverage, limits, dates, and who it is issued to. It proves the builder bought something. It is not the thing he bought. It does not show the exclusions, the deductible, whether the premium is paid, or whether the policy is still in force the day after it was printed. Some certificates promise notice if the policy is cancelled; many promise nothing. Ask for written notice of cancellation in the contract.
Additional insured means the builder’s liability policy responds to a claim against you arising out of his work, which matters when the neighbour sues the owner and the builder together. It is a routine endorsement. A builder who will not issue a certificate at all almost certainly has no policy or a lapsed one, and either way the conversation is over.
- Legal name on the certificate matches the name on your contract and your cheques.
- Commercial general liability of at least $2,000,000, expiry past your completion date.
- You are shown as additional insured; your lender is on the builder’s risk certificate as mortgagee.
- A WSIB clearance pulled this quarter, and again after the 20th of February, May, August or November.
How Much Liability a Home Builder Should Carry
| Policy and limit | Figure found | Source type |
|---|---|---|
| Residential general contractor, commercial general liability, the floor | $2,000,000 | a national brokerage; a Canadian renovation marketplace |
| Commercial general liability, common on larger custom homes | $5,000,000 | Canadian broker pages |
| CCDC 41 standard schedule, commercial contracts | $10,000,000 per occurrence | the CCDC 41 schedule with CCDC 2 2020 |
| Indicative annual premium, GC at $2,000,000 | $550 to $1,500 | an Ontario brokerage page; indicative |
| Builder’s risk on a $500,000 house, 0.5 / 0.9 / 1.5 percent | $2,500 / $4,500 / $7,500 | our planning numbers inside the published range |
| Top of the published range at 4 percent, same house | $20,000 | two Ontario brokerages and a comparison site; not our estimate |
November 2026. The liability premium is the builder’s own cost, shown so you know a certificate is cheap. Builder’s risk planning numbers assume a 9 to 12 month build, a $2,500 deductible, a protected area and land excluded.
Why insurance prices are all over the map: whoever buys the policy will get quotes that disagree. The brokerages, insurers’ guides and lenders we checked did too: an Ontario and Quebec brokerage and a Canadian renovation marketplace put it at 0.5 to 1 percent of rebuild value, while two Ontario brokerages and a Canadian comparison site said 1 percent up to 4. On a $500,000 house that is $2,500 at one end and $20,000 at the other. Behind the gap: percent of hard cost versus a flat minimum, term, deductible, construction type, fire protection grade, and whether soft costs and liability are in or out. Budget about 1 percent, roughly $4,500 on $500,000, and have two or three brokers quote the same written description of the build.
Ask for $2,000,000 as a minimum, $5,000,000 on a house over about a million dollars or a tight lot. The builder’s risk cost page works the premium side through in full.
Subcontractors, Deductibles, Lapses and the Neighbour’s Fence
A general contractor’s liability policy covers the GC’s own legal liability, which includes much of what his subs do on his job. It does not make the subs insured, and it does not pay for a sub’s tools, truck or injured worker. A good GC collects certificates and clearances from every sub; ask to see the file. Redoing faulty workmanship is not a builder’s risk claim, and a liability policy does not pay a contractor to redo his own work either; that is a contract and warranty matter, the subject of the Tarion versus insurance page, though the physical damage bad work causes to other parts of the house is generally covered.
The deductible is the part of the dent you pay yourself. Expect $1,000 to $5,000 on a house build, often higher for water. The policyholder pays it regardless of who caused the loss, then recovers it from whoever did if the contract says so. If the contract is silent and the framer’s heater started the fire, you are arguing about $2,500 in the middle of a $300,000 claim.
A builder’s policy that lapses mid-job is your problem too, because it is your house standing there uninsured. Put certificate expiry dates in the same calendar as the draws; if a renewal has not arrived on the day, stop the job until it does. The neighbour’s property is a liability loss, not a builder’s risk loss: the excavator that undermines the fence goes to the liability policy of whoever did it, and to yours if you are sued alongside. That is why the additional insured line matters.
We build houses and carry these policies on every one of them; we do not sell insurance, we name no brokers or insurers, and we take no fee from anyone in the business. The binding answer on any policy comes from a RIBO-licensed broker. The plain-words fine print: this page is general information from a builder, not insurance, legal or tax advice; policies and contracts differ; confirm your own arrangement with a RIBO-licensed broker and your lender before the first truck arrives.
Questions people ask
How do I verify that a contractor has liability insurance in Ontario?
Ask for a certificate of insurance issued to you, then phone the brokerage shown on it and ask whether the policy is in force today. Check the legal name, the limit and the expiry against your contract and schedule. A contractor who cannot produce a certificate almost certainly has no policy.
How much liability insurance should a custom home builder carry?
At least $2,000,000 commercial general liability is the floor in Ontario residential work; $5,000,000 is common on larger custom homes; the CCDC 41 schedule for commercial contracts requires $10,000,000. A $2,000,000 policy costs a general contractor roughly $550 to $1,500 a year on an indicative Ontario brokerage page, so cost is no excuse.
Does a general contractor’s insurance cover all subcontractors?
It covers the general contractor’s own liability, which includes much of what the subs do on his site, but it does not insure the subs, their tools or their workers. Each sub should carry its own liability and WSIB, and the GC should hold the paper.
Who pays the insurance deductible after construction damage?
The policyholder pays the deductible to the insurer, whoever caused the loss. Whether the policyholder then recovers it from the party at fault depends on the contract, so write it in: the party whose work caused the loss pays the deductible, and the amount is confirmed on the quote before work starts.
Who is liable if a contractor damages neighbouring property?
The contractor who caused it, through his liability policy, and potentially you as the owner if the neighbour sues both. Being named as additional insured on the contractor’s policy means it responds for you too. An owner-builder with no liability policy of his own carries that risk personally.
Settle it before the contract is signed, not after the storm
Run your build through the calculator so you know what the builder’s risk policy should cost whoever carries it, and use the quote request sheet so every quote describes the same house. The hub has the free booklet and the paid coverage review with a builder.
Sources and further reading
- CCDC 41 insurance requirements: the standard contractor insurance schedule used with CCDC 2 contracts.
- CCDC 2 owner-insured supplement (BC government): how a contract reads when the owner, not the contractor, carries the builders risk policy.
- RIBO consumer fact sheet: brokers must be licensed by the Registered Insurance Brokers of Ontario, and how to complain about one.
