What is Builder’s Risk Insurance – and Why Do You Need it for a Home Renovation in Victoria?

There are many moving parts when it comes to planning a home renovation in Victoria. First, you need to figure out your reasons for a renovation to identify what’s missing from your home and why it’s important to you. Are you looking for more living space? Are you embarrassed by your current kitchen? Or maybe you’re dreaming of a luxurious spa bathroom to soak away the stress? Once you have the why figured out, you then need to choose a renovation contractor you can trust to do the job well, do the job right, and take care of everything from start to finish. Then it’s planning, budgets, designs, schedules, construction, and clean-up, and before you know it, you’re sitting in your updated home enjoying the new space that perfectly suits you and your lifestyle. One of the steps that is rarely mentioned during the planning process is the insurance required to keep you and your builder protected for the duration of your renovation. There are two sides to insurance:  the coverage you want your contractor to carry and the coverage you need to protect your home and investment. At MAC, we carry $5 million in commercial general liability insurance, as well as vehicle insurance and workers compensation insurance to protect our team and equipment, and for our homeowners, we require them to maintain Builders Risk Insurance for the entire renovation.

What is Builders Risk Insurance?

Builders Risk Insurance, sometimes called Course of Construction insurance coverage, is a specific policy that looks at the various components of a construction project, including the type of construction, on-site security measures, project length and scope (including material costs), and the contractor’s claim history. Each insurance company may have different conditions and requirements, but they will usually cover damage from specific perils, such as:

• Lightning
• Fire
• Theft or vandalism
• Flood
• Structural damage from weather

If you experience an event that’s covered by your insurance, the insurer may make things right by some of all of the following:

• Replacing the lost or damaged building materials
• Repairing physical damage
• Covering legal (or other professionals) fees
• Paying for site clean-up to remove damaged materials

Who is responsible?

When you sign the contract for your renovation project with MAC, you’ll note that the insurance section explains that we are responsible for all of the materials we provide for the work outlined in the contract until the materials are installed. You will need to discuss your coverage with your preferred insurance professional to obtain the appropriate insurance coverage as well as the rules and warranties that surround it. In the case of a loss, you will need to file a claim with your insurance provider to initiate the claim.

Consult with your insurance professional to confirm you have sufficient insurance for your home renovation project in Victoria.

Working with Professionals

Dmitrii Pavlenco, Commercial Insurance Specialist at Federated Insurance, gave us some answers to the questions we’ve heard about Builders Risk insurance in B.C.

What Kind Of Insurance Should Your Contractor Carry?

Dmitrii: “It depends on what you’re doing. For a small renovation, like a bathroom, where you’re not moving out of the home, you should confirm that your contractor is carrying enough liability coverage. Depending on the value of your home, $2 million should be more than sufficient, but the average carried by contractors like MAC Renovations is around $5 million. “For a large renovation, where you are packing everything up and moving out of the home and placing it in the care and custody of the builder or contractor, you will need a course of construction policy to provide coverage for the existing structure as well as anything that you’re putting in during the renovation. For example, your house right now is valued at a million dollars, and you’re doing a half-million-dollar renovation. In this example, your course of construction insurance should be at least $1.5 million.”

How Does Builders Risk Coverage Work?

D: “What’s actually covered is the building itself. So with our example of the $1 million house with the $500,000 renovation, course of construction provides coverage for the building. If there were a fire, and the whole $1.5 million structure went up in flames a couple of weeks before the renovation was done, we would pay for the building itself. The contractor would go back in and rebuild it, as this basically covers the full replacement cost of the building. As well you can insure against loss of profits or soft costs to the policy, like architectural fees, design fees, or legal expenses that pile up because you have to go back and redo the job. And there are optional coverages, like an earthquake, flood, sewer backup, and other perils that you can add to give you the coverage you need.”

Does my Homeowner’s Policy Cover Anything?

D: “In the example I shared, a homeowner’s policy would likely decline the claim because the house had been vacant for more than 30 days. The same would go for claims against theft, damage, flood, etc. “If you’re packing everything up and putting it in storage for the duration of your renovation, your valuables may be protected through your homeowner’s insurance or through the storage facility if you’ve opted for insurance through them, but if your home is vacant for 30 days or more, it’s likely that any claims would be declined, but it does depend on the homeowner policy.”

What are Warranties?

D: “Whenever you see the word ‘warranty’ in insurance, that’s something you’ll need to pay attention to, as it means an action or safeguard that you need to have in place to maintain coverage. For a building project, it might mean you have to have fencing, lights, and cameras on 24/7 in order to maintain your coverage. And if you don’t, and something happens, your claim might be declined outright in some cases, or your $1000 deductible goes up to $100,000, depending on the warranty and coverage.”

MAC Renovations is your full-service home renovation team in Victoria

Regardless if you’re doing a small bathroom renovation or a whole home remodel, it’s important that you reach out to your insurance agent to ensure you have the right insurance coverage for your home. You’re making a significant investment in your home, and going without insurance just isn’t worth it. As a full-service, design-build renovation and construction team here in Victoria, we can help you make the right decisions around all aspects of your project. Contact us to see why we’re known as Victoria’s most trusted contractor.