Read This Before Your Project Heads Into Winter
Builders risk insurance in Canada protects a building while it is going up, but the limit is usually set once, at the start of the job. Picture a contractor six months into a build. Every supplier has raised prices since the bid, the framing is up, and then a fire takes out most of the structure. The insurer looks at the value declared a year ago, and the gap between that number and today’s rebuild cost comes out of the contractor’s pocket.
The problem is simple: your project got more expensive, but your insurance did not. The goal here is to help you look at your policy like an underwriter, not like a busy contractor, so you can spot that gap before a loss does.
This focuses on new builds and major renovations in Canada. Policy terms vary by insurer, and the wording in your own policy is what counts. This matters even more heading into winter, when many projects are mid-build and fire, freezing, and storm risks rise.
What Is Builders Risk Insurance in Canada, and How Is the Limit Set?
Builders risk, also called course of construction insurance, covers a project while it is being built. In plain terms, it may pay to repair or rebuild:
- The structure itself, from foundations to framing
- Materials on site waiting to be installed
- Temporary items such as scaffolding, forms, and fencing
Most policies are written on a completed value basis. That means the limit is the expected value of the finished project, usually set when the policy starts. That number covers the hard costs of building it: materials, labour, and fixtures. Soft costs, such as permit fees, design fees, and loan interest, are usually not included unless you add them.
The weak point is timing. The completed value is an estimate made on day one, and it only stays accurate if prices stand still.
How Do Rising Costs Leave a Project Underinsured?
Prices have not stood still. According to Statistics Canada, non-residential building costs in the second quarter of 2026 were 3.5 percent higher than a year earlier, and residential building costs were 2.3 percent higher. Non-residential costs were also about 12 percent above their 2023 average. A project insured on prices from a year or two ago may now be worth noticeably more than its policy limit.
That gap hurts in two ways:
- Your limit runs out sooner: If a total loss costs more to rebuild than your limit, you pay the difference.
- The coinsurance clause can cut even small claims: Many builders risk policies require you to insure 100 percent of the completed value. If you insure less, the insurer may reduce every claim in proportion, even a claim far below your limit.
The second point surprises many contractors. Being underinsured does not only matter for a total loss. It can shrink the payout on a partial loss too.
Red Flags Hidden Beyond the Main Limit
The headline limit is not the only number that can fall behind. Watch for:
- Materials off site or in transit: Costly items like HVAC units or steel may be covered only up to a small sublimit while stored elsewhere or on a truck.
- Theft limits: Pricier metals and equipment make sites a bigger target, and theft cover may have its own lower limit.
- Soft costs and delay coverage: If a loss delays the project, extra interest, fees, and lost rental income may not be covered unless you added them, and older limits may be too low.
- Change orders: New scope added mid-project raises the completed value, but the policy does not update on its own.
- The policy end date: Delays can push a project past its expiry, leaving the building uncovered before handover.
Timing is another quiet trap. Winter slowdowns stretch schedules, so a project insured to finish in December may still be open in March.
How Does a Claim Work When You Are Underinsured?
Here is how the numbers can work. The figures are illustrative, and every policy calculates claims a little differently:
- A contractor insured a project at a completed value of $2,000,000, based on last year’s prices
- Rising costs push the real completed value to $2,300,000
- A fire causes $400,000 in damage
- The policy has a 100 percent coinsurance clause, and the project is insured for only about 87 percent of its true value
- The insurer pays about 87 percent of the loss, roughly $347,800, minus a $10,000 deductible, for a payment of about $337,800
- The contractor absorbs about $62,200
No part of the loss was excluded. The shortfall came only from an outdated limit, which is why keeping values current matters as much as having the policy.
Smart Ways to Keep Your Builders Risk Limit Current
Keeping your limit right is easiest before a loss, not after. On every active project, you can:
- Compare your insured completed value with your latest budget and supplier quotes
- Tell your broker about change orders that add scope or cost
- Check limits for materials stored off site or in transit
- Confirm your policy end date still matches your schedule
Good questions for your broker include:
- Does my policy have a coinsurance clause, and how would it affect a partial loss?
- Are soft costs and delay coverage included, and are the limits still enough?
- How do I increase my completed value mid-project?
You may want to take extra care if your project is longer than a year, relies on steel, metal, or mechanical equipment, has had several change orders, or is likely to run into winter. Our earlier post on managing build costs in 2026 covers the budgeting side of rising prices.
Ai Insurance Organization Inc. works with contractors, builders, and developers across Canada and sees how often a limit set on day one falls behind by month six. They can help you review your values, update your policy mid-project, and close gaps before winter sets in.
Keep Your Builders Risk Insurance in Step With Your Costs
If you are ready to feel more confident about how your project is protected, we can help you get started with builders risk insurance that keeps pace with your real costs. At Ai Insurance Organization Inc., we take the time to understand your project, your schedule, and your budget so one loss does not turn into an unexpected bill. Reach out to our team with your questions or to request a quote, or contact us to schedule a conversation.
