Building a new home, undertaking a major renovation, or adding a legal secondary suite can be one of the most exciting — and financially rewarding — projects you ever take on. But before the first shovel hits the ground, it’s critical to understand one of the most important protections you’ll need along the way: Course of Construction Insurance.
This specialized insurance policy is not just a smart move — it’s mandatory if you’re financing your project through a mortgage lender. It protects your investment while the work is underway, shielding you from costly risks like fire, theft, vandalism, or weather damage during the vulnerable stages of construction.
As a licensed mortgage agent, my role is to guide you through every stage of your project — including making sure you have the right insurance coverage in place before funding is released. In this article, I’ll explain exactly what Course of Construction Insurance is, why it’s required, what it covers, when it’s needed for renovations, and how to avoid common pitfalls that can delay your project.
What is Course Construction Insurance?
Why is Course of Construction Insurance Required?
What Does Course of Construction Insurance Cover?
When Course of Construction is Required for Remodel or Renovation
What is Course Construction Insurance?
Course of Construction Insurance — often called Builder’s Risk Insurance — is a specialized insurance policy that protects a property while it’s being built or renovated.
Unlike regular home insurance, which protects a completed, lived-in home, Course of Construction Insurance covers the building during the vulnerable construction period — when it’s exposed to risks like fire, theft, vandalism, weather damage, or accidents before it is completed and occupied.
Why is Course of Construction Insurance Required?
- Protection against loss: Until a home is fully built and ready for occupancy, it’s exposed to unique risks that standard insurance policies don’t cover.
- Lender requirement:
Every mortgage lender in Canada (banks, credit unions, private lenders) requires proof of active insurance before advancing any construction funds. Without Course of Construction Insurance, they will not release draws or funding. - Builder and owner protection:
If there is a major incident (like a fire during framing), this insurance ensures there are funds available to rebuild — not just starting over from personal funds.
What Does Course of Construction Insurance Cover?
Typically, it covers:
- Building materials (on-site or sometimes even in transit)
- Labour and work completed to date
- Temporary structures (like scaffolding, construction trailers)
- Equipment theft or vandalism
- Fire, windstorm, hail, and water damage (limited, depending on the policy)
Some policies also include soft costs (like permit fees or interest costs) if construction is delayed by an insured event.
When Course of Construction is Required for Remodel or Renovation
Depending on the scale of the renovation or remodel, you very likely do need Course of Construction Insurance.
Major renovations where the structure is exposed, significantly altered, or uninhabitable during construction
Examples:
- Gutting the interior of the home
- Removing load-bearing walls
- Adding new floors or major additions
- Replacing major systems (electrical, plumbing, HVAC)
Construction projects that add substantial new value to the property (such as adding a legal secondary suite, finishing a basement extensively, or building an extension).
When required by your mortgage lender: If you’re financing the renovations through a construction loan or a draw mortgage, lenders will require active Course of Construction Insurance to release funds.
If the home is vacant during construction: Homeowner’s insurance policies usually become void or severely limited if a home is vacant for more than 30 days — even if minor work is happening.
When Course of Construction Insurance Might Not Be Required
Minor renovations like painting, installing new flooring, cabinetry upgrades, or cosmetic work where the home remains structurally sound and occupied.
Occupied properties undergoing light-to-moderate updates with limited exposure to external risks (for example, replacing kitchen cabinets or installing a new bathroom vanity).
However, even for lighter work, it’s essential to inform your insurance company — otherwise, you could unknowingly void your standard homeowner’s policy if they aren’t advised about renovations.
Why It Matters
- Standard home insurance policies usually exclude major renovation risks.
- Course of Construction policies fill that gap — covering theft of materials, fire during construction, structural collapse, and vandalism risks that homeowner’s insurance won’t cover during significant work.
- Lenders protect their investment by requiring it before advancing renovation funds.
Important Features
Protects the structure, building materials, and labour completed so far.
Covers risks like fire, theft, vandalism, weather damage, and accidents.
Required by lenders before any mortgage funds are released.
Prevents costly delays if something unexpected happens during construction.
Coverage Start: Before construction work begins.
Coverage End: When construction is complete, and an occupancy permit is issued.
Coverage Amount: Based on the completed appraised value of the home.
Before Your First Draw
To avoid funding delays, make sure you have completed the following:
1. Course of Construction Insurance Policy
- Secured through an insurance broker
- Covers full, completed value of the home
- Lender named as “first loss payee” on the policy
2. Provide the Insurance Binder to Me
- The document must clearly show:
- Policy number
- Property address
- Coverage dates
- Coverage amount
- Lender listed as mortgagee
3. Confirm Coverage Start Date
- Insurance must be effective before any construction begins.
4. Plan for Transition
- Arrange with your insurance provider to switch to standard homeowner’s insurance after final construction completion and receipt of occupancy permit.
5. Review Exclusions and Additional Options
- Discuss flood protection, sewer backup coverage, soft costs (permits, financing charges), and any other risks specific to your build.
Pro Tip: Starting construction without insurance — even for one day — can void your mortgage agreement and put your investment at risk.
Key Points for Borrowers
- Must be active before construction starts.
Your lender will ask for a copy of the insurance binder showing Course of Construction coverage before releasing any money. - Can transition to regular home insurance.
Once the home is complete and receives an occupancy permit, the policy can usually be converted into a standard homeowner’s policy. - Coverage amount:
Should be based on the final, completed value of the home, not just the current stage of construction. - Who buys it?
Typically, the property owner must secure the policy if they are self-managing the build. If a licensed builder is fully contracted for the project (e.g., in a turn-key new build), they may carry the insurance — but it must be verified.
Quick Summary
| Term | Details |
| Purpose | Protects a building under construction against unexpected damages |
| Required By | Mortgage lenders before advancing funds |
| Covers | Materials, labour, theft, fire, vandalism, weather |
| Ends | When construction is complete and home is ready for regular insurance |
| Owner’s Role | Client must provide proof of active coverage throughout the project |
My Final Thoughts
Building a home is a huge investment, and Course of Construction Insurance is what ensures that investment is protected every step of the way.
As a licensed mortgage agent, I always ensure my clients understand the importance of this coverage, help them anticipate costs, and keep their financing moving forward without delays.
If you’re planning to build or renovate, let’s make sure you have the right financing — and the right protection — in place before you break ground.
