Insurance for Buildings Under Construction or Renovation

Posted on Monday, April 9, 2018

Insurance for Buildings Under Construction or Renovation

The thought of building something new is exciting. You’ve saved for a long time to build your dream kitchen, to expand your home with an addition or to build a new barn, workshop or garage. Most people consider insurance for their project as an afterthought. These types of construction activities may not be covered under your current property insurance policy.

In this article, we define what “under construction” means for insurance coverage and how to insure your project.


Ayr Farmers Mutual defines “under construction” as: “construction from the foundation, or any alterations or repairs to the “dwelling” which result in the piercing of an exterior wall or the roof for more than twenty-four hours, or which necessitates your temporary relocation.”

Let’s simplify this further. When considering renovating your home or structure, our Agents and Brokers will ask questions to determine if your renovations are “COSMETIC” or “STRUCTURAL.”


Painting the interior of your home, replacing drywall, or changing up your flooring, are all considered cosmetic renovations. No interior/exterior walls or the roof are being removed. Your home is still livable while under renovation. Your homeowner’s policy covers this type of renovation. If your renovation increases the replacement cost (not the market value) of your home by 25%, your Agent or Broker will re-evaluate your home’s replacement cost.


Adding an addition or adding a storey, are structural changes. When the structural integrity of a building changes, it is in a fragile state until completed. The potential for loss is greater. To accommodate this increase in risk, a Builder’s Risk Policy is required.


What is a Builder’s Risk Policy?

A Builder’s Risk Policy provides coverage for a building under construction or renovation. This policy can be purchased by the homeowner, or the contractor – depending on what is agreed upon in the building contract. A homeowners policy excludes coverage for theft or attempted theft of building materials. A Builder’s Risk policy can fill in this coverage gap.

Generally, a Builder’s Risk Policy is purchased as a separate policy, for a six-month term. This length can be extended, depending on the duration of the project in question. The policy must be in place before the foundation is poured for new construction. The policy premium is based on the cost to complete the renovation or structure. If a homeowner chooses to insure their structure for less than the cost to complete the renovation, a coinsurance penalty may apply.

Coinsurance: a penalty placed on underinsuring a building.

If a building’s plans change mid-term, please notify your insurance company to ensure that the revised value of the completed structure is accounted for, to avoid any coinsurance penalties.

A liability extension is required due to the increased exposure related to the project.  Liability can be extended from your Ayr Farmers Home Insurance Policy.

If you are considering a renovation or modification to your home, please contact your Agent or Broker to discuss. They will advise you of all insurance implications for your project.


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