Introduction to Builder’s Risk (Course of Construction) Insurance

Builder’s Risk Insurance—also known as Course of Construction (COC) insurance—provides specialized property insurance designed to protect new builds and renovations during construction. The policy covers a broad array of physical damage risks to the building, materials, and sometimes equipment on-site while projects are underway. Summit Commercial Solutions offers tailored Builder’s Risk solutions for developers, contractors, property owners, and managers with unique industry needs and project scopes.

For more information on Summit’s Builder’s Risk Insurance coverage, visit Builder's Risk (COC) Insurance Canada - Summit.

Key Components of Builder’s Risk Insurance

1. Who Needs Builder’s Risk Insurance?

• Developers and property owners

• General contractors and construction managers

• Subcontractors (where contractually required)

• Lenders or mortgagees (as an insurable interest)

• Property managers overseeing renovations

2. Project Types Covered

• New building construction (commercial, industrial, multi-family, residential)

• Major renovations and tenant improvements

• Building additions or extensions

• Civil projects (roads, bridges, infrastructure, subject to eligible criteria)

3. Core Coverage Elements

• Structure under construction

• On-site materials, fixtures, and equipment

• Temporary structures (scaffolding, forms)

• Property in transit and at off-site storage (optional)

• Labour and overhead associated with hard costs

4. Timeframe

• Covers from the date construction starts until substantial completion, occupancy, or as defined in the policy.

• Can be extended if there are project delays.

Insured Parties and Additional Insureds: Who is Typically Covered?

Builder’s Risk policies are customizable to include all parties with an insurable interest in the project.

Named Insureds

• Project owners/developers (typically primary named insured)

• General contractors and/or construction managers

• Sometimes key subcontractors (plumbing, electrical, mechanical firms)

Additional Insureds & Interests

• Lenders and mortgagees (named as loss payee)

• Architects and engineers (usually as additional insureds for their work)

• Property managers, when overseeing major renovations

• Municipalities or regulatory authorities (as required by contract)

Why is proper insured party setup critical?

• Ensures all project stakeholders are protected and can access indemnity in the event of a loss

• Addresses contractual requirements for funding, permitting, and legal compliance

• Prevents disputes over proceeds in the event of a claim

Summit Commercial Solutions brokers work closely with clients and legal advisors to structure insureds and loss payees based on project contracts and risk transfer requirements.

Soft Costs Coverage: What are Soft Costs, and Why are They Important?

Most Builder’s Risk policies are designed to cover “hard costs” (the direct costs of construction materials and labour), but expanded coverage for soft costs is often critical for new builds and renovations, especially when project financing or schedule is involved.

Definition of Soft Costs

Soft costs are non-physical or indirect property-related expenses that continue or are incurred as a result of a delay caused by a covered builder’s risk claim (e.g., fire, theft, water damage):

• Architectural and engineering fees

• Legal, accounting, or insurance fees

• Interest or loan carrying costs

• Permit fees or reinspection costs

• Real estate taxes

• Marketing expenses

• Administrative and consulting costs related to project delays

When is Soft Cost Coverage Triggered?

• When a physical loss occurs and construction is delayed as a result

• Covered ongoing or extra expenses incurred during the period of repair/restoration

Examples of Soft Cost Claims

• Flood damages framing and wiring, delaying completion by 60 days: Soft cost coverage reimburses extended financing, permits, and extra design fees.

• Fire damages a floor, requiring re-inspection and revised blueprints: Soft cost coverage includes updated permit and engineering costs.

Who should purchase Soft Cost coverage?

• Any owner/contractor financing projects through loans/bonds

• Developers with significant non-construction costs at risk

• Projects with fixed completion or lease dates (penalties for delay)

Summit’s Approach

Soft costs coverage is quoted and structured based on a detailed review of the project budget and exposure analysis. Summit Commercial Solutions brokers ensure budget line items are reviewed for coverage and help document eligible costs before policy inception.

Reference: The Institutes: IRMI Soft Costs in Builder’s Risk Insurance

Delay in Start-Up (DSU) / Delay in Completion Coverage

Delay in Start-Up (DSU) coverage (also known as Delay in Completion, or Advanced Loss of Profits) is an extension of Builder’s Risk designed to indemnify the project owner for lost revenue or rental income resulting from an insured delay during construction.

What does DSU Cover?

• Lost anticipated revenue (e.g., rent, hotel bookings, sales) due to delay

• Additional interest or financing charges due to extended construction

• Incremental operational costs

• Cover usually begins after a qualifying physical property loss under the Builder’s Risk policy and pays during the indemnity period until the project is complete

Common Use Cases for DSU

• Commercial building with pre-leased tenants – DSU pays for lost rental income if an insured loss causes an opening delay

• Hotel or hospitality projects with projected opening dates and bookings

• Retail or industrial developments reliant on grand opening deadlines for operational revenue

DSU vs. Soft Costs

DSU Policy Structuring Notes

• Requires detailed project timelines and revenue projections to price coverage

• Time deducted: DSU indemnity period deductibles are typically measured in days (waiting period)

• Usually purchased primarily by project owners/investors, not contractors

• Essential for projects financed by loans/leases with penalty clauses or expected future earnings

Reference: Marsh Canada: Builder’s Risk Policies and DSU

How Summit Structures Builder’s Risk for Insured Parties and Extensions

Summit Commercial Solutions utilizes industry best practices to tailor coverage:

• Brokers conduct risk discovery to identify all project stakeholders and contractual insurance requirements.

• Insured parties (including joint ventures) are listed as named insureds or additional insureds per lender and contract needs.

• Loss payee and mortgagee clauses are carefully reviewed to ensure appropriate claims disbursement.

• Soft costs and DSU extensions are quoted based on project budget review, timeline analysis, and revenue documentation.

• Custom endorsements are available for transit/storage, off-site fabrication, landscaping, equipment, testing, and commissioning as required.

• Policy periods can be extended if the project faces construction delays for covered reasons.

• Summit’s dedicated account managers coordinate with legal, lending, and construction stakeholders throughout the project life.

For quotes and set-up, contact Summit Commercial Solutions: Get a Quote

Builder’s Risk Features and Benefits with Summit

• Custom policy wordings for each project and industry sector (commercial, multi-family, industrial, special use)

• Market comparison and placement with multiple A-rated carriers for best terms/price (Summit is fully independent)

• Transparent commission structures and compensation disclosure (How We Get Paid)

• Dedicated account management and claims support throughout the construction project

• Coverage for Canadian projects coast-to-coast, including major urban and remote locations

• Optional extensions:

• Earthquake, flood, and other natural catastrophes.

• Equipment breakage/testing

• Professional fees

• Debris removal, pollution cleanup

• Off-site storage and transit

• Responsive service: Rapid turnaround on urgent certificate and evidence requests for funders, municipalities, or change orders

Example Use Cases

Case 1: Commercial Office Building (New Build)

• Insured Parties: Developer (named insured), general contractor (additional insured), lender (loss payee)

• Coverages: Main structure, on-site materials, soft costs (permitting, loan interest), DSU for rental income losses if delayed

Case 2: Apartment Complex Major Renovation

• Insured Parties: Property management company (named insured), lead contractor (additional insured)

• Coverages: Hard and soft costs (architectural redesign fees, rebranding), off-site storage, transit

Case 3: Retail Expansion with Franchise Deadlines

• DSU essential to cover lost sales/royalties if buildout delays grand opening

• Soft cost coverage for substantial tenant improvements, marketing, and reinspection costs

Comparison Table: Builder’s Risk, Commercial Property, and Project Insurance

Frequently Asked Questions: Builder’s Risk, Soft Costs, and DSU

What documentation is required to add soft costs or DSU?

• Project budget with breakdown of hard/soft costs

• Timelines/milestones worksheet

• Revenue pro formas (if DSU applies)

• Loan/funding agreements (for interest and penalty triggers)

Who pays for Builder’s Risk coverage?

• Premiums can be paid by owner, developer, or bundled via contractor (depending on project agreement). Summit facilitates invoicing and documentation for blended arrangements.

Is coverage available for materials in transit/off-site storage?

• Yes, available as an add-on. Essential for projects relying on staged delivery/logistics.

What are typical coverage exclusions?

• Wear and tear, faulty design or workmanship, employee theft not involving forcible entry, war/terrorism (unless endorsed)

• Contractor’s own equipment/tools (covered by contractors equipment insurance, not Builder’s Risk)

• Pre-existing (prior damage) conditions

Can coverage be customized for special projects?

• Yes. Summit Commercial Solutions can structure project-specific wording and endorsements, including:

• Green construction upgrades

• Renewable energy projects

• Heritage/heritage-registered building constraints

Is DSU coverage available for all project types?

• Generally available for commercial, residential, industrial builds, and major renovations, subject to carrier underwriting. Some civil/infrastructure projects may be eligible subject to review.

What are common triggers for Builder’s Risk or DSU claims?

• Fire, water/flood, windstorm or hail, vandalism/theft, and other covered perils resulting in physical property damage leading to project delay or restart

Summit’s Value Proposition in Builder’s Risk Setup

Summit Commercial Solutions is a broker "built for the future," providing:

• Technology-enabled risk management throughout the construction project lifecycle

• Fully independent market access for optimal pricing and carrier matching

• Transparent service, commission, and compensation disclosures (see here)

• Dedicated account managers with industry specialization for construction, equipment, and project risk

• Rapid quote and certificate turnaround to facilitate project mobilization and compliance

• Proactive claims advocacy with Canada’s most responsive claim support team (Summit Claims)

• Expansive blog/articles on insurance issues for construction industry Summit Blog

To discuss or set up Builder’s Risk Insurance with soft costs and DSU for your next new build or renovation, contact Summit: Get a Quote

Additional Resources and Credible References

• Summit Builder's Risk Insurance

• Canadian Underwriter: Builder’s Risk Insurance Overview

• International Risk Management Institute: Builder’s Risk Coverage Forms

• Marsh: Delay in Start-Up Coverage