If you are planning a major renovation or addition in Ontario, call your insurer before work starts, and ask whether you need a builder's risk policy (also called course of construction insurance). Standard home insurance is built for occupied, non-renovating homes, and coverage can change significantly once construction begins. A contractor's own liability policy does not fill that gap. This guide explains who covers what, what to ask, and how to keep your paper trail clean.
TL;DR
- Tell your home insurer about any major renovation before it starts. Failing to disclose it can lead to a denied claim if a loss occurs.
- Standard home policies typically exclude construction-related losses, so large projects often need builder's risk coverage for the structure, materials and supplies.
- A contractor's commercial general liability policy protects the contractor, not your house. Ask who is buying the builder's risk policy and get it in writing.
- Check your home's occupancy status with your insurer. A gutted house can be treated as vacant, which can trigger exclusions such as frozen pipes and water damage.
- Keep a record of everything: photos, contracts, change orders and payments. Claims can take longer than you expect.
Table of Contents
- Why a major renovation changes your insurance
- What to tell your insurer, and when
- The vacancy trap
- Builder's risk insurance: what it is and who buys it
- Contractor liability insurance is not your protection
- What insurance will not cover
- Paying safely: deposits and holdbacks
- WSIB: a related question homeowners ask
- Perspective: how we handle insurance on a full-home project
- Keeping records that make a claim easier
- A pre-construction insurance checklist
- Working with a builder who raises this early
- FAQ
- Sources
Why a major renovation changes your insurance
Your home policy was priced on a particular house, lived in by particular people, in a particular condition. A gut renovation, a rear addition or a second-storey build changes every one of those facts. Walls are open, trades come and go, utilities may be disconnected, and the house may sit empty during the day or for weeks at a time.
Insurers care about this because it is a change in risk. According to the Insurance Bureau of Canada (IBC), homeowners should notify their provider of major renovations before starting, and failing to disclose them can lead to a denial of a future claim if an insured loss occurs. That is the single most expensive mistake in this topic, and it is entirely avoidable with one phone call or email.
The changes also work in the other direction. Once the renovation is finished, the replacement value of your home may be very different. A finished kitchen, new mechanical systems, custom millwork and an extra floor all cost more to rebuild than what you started with. Update the policy at completion, not at renewal.
What to tell your insurer, and when
Call your broker or insurer before demolition, not after the permit arrives and not once the dumpster is in the driveway. Be specific. Vague answers produce vague coverage.
- Scope. Describe the project plainly: interior gut, structural changes, new mechanical systems, rear addition, second-storey addition, or a combination.
- Timeline. Give the expected start and finish dates, and tell them if the schedule slips.
- Occupancy. Say whether you will live in the house during the work. If you are moving out, say so.
- Value. Give the budget and the expected value of the finished home.
- Who is doing the work. Name the general contractor and mention that trades and subcontractors will be on site.
Ask for the answers in writing. If your insurer says the policy continues unchanged, you want that on record. If it says an endorsement or separate policy is needed, you want the conditions spelled out.
The vacancy trap
This is the one that catches families who move out for a long renovation. Standard policies often contain exclusions for frozen pipes or water damage if the home is considered vacant or unoccupied during construction. In Ontario, where a winter renovation means heating a house with no insulation in parts of the envelope, that matters.
Before you move out, ask your insurer directly:
- Will the home be treated as vacant or unoccupied during construction?
- Does that change coverage for water damage, freezing or theft?
- What conditions apply, such as heat maintained or periodic inspections?
If a loss does happen, such as a burst line or a leak behind an open wall, the cleanup is a job in itself. Homeowners dealing with a flooded lower level sometimes look into basement water damage removal for clearing out affected contents, but the claim itself depends on whether your policy responded in the first place.
Builder's risk insurance: what it is and who buys it
Builder's risk, also called course of construction insurance, is a policy designed for projects under way. The IBC says that for major projects homeowners may need a builder's risk policy to cover damage to the structure, building materials and supplies, because standard home insurance typically excludes construction-related losses.
Think of the risks it is meant to address: fire in a partly framed addition, theft of materials from site, storm damage to an open roof, or water getting into a structure before it is closed in. These are exactly the events that a standard homeowner policy may not respond to once your house becomes a construction site.
The same IBC guidance notes two ways to arrange it:
| Option | How it works | What to confirm |
|---|---|---|
| Homeowner buys it | You arrange the policy through your broker | Coverage start and end dates, what is insured, who is named |
| Contractor arranges it | The cost appears as a line item in the project quote | You are named on the policy, the limits fit your project, you receive the policy documents |
Either route can work. What does not work is assuming someone else has it covered. Ask the question early, ideally while you are comparing quotes, and treat the answer as part of the contract.
Contractor liability insurance is not your protection
Homeowners often hear "we're fully insured" and stop asking questions. The sentence is true of nearly every legitimate contractor, and it still may not protect your house. A contractor's commercial general liability (CGL) policy primarily protects the contractor. If a major accident occurs, your personal home policy may not cover the damage to the structure itself, which is why a separate builder's risk policy matters for full financial protection.
When a contractor says they are insured, follow up with these:
- Can you send me the certificate of insurance for your liability policy?
- Does the project include builder's risk, and who pays for it?
- Am I named on the policy, and what are the limits?
- What is the deductible, and who is responsible for it?
- How are subcontractors covered?
A contractor who answers these without hesitation is usually one who runs jobs carefully. One who gets vague is telling you something.
What insurance will not cover
Insurance is not a quality guarantee. Per IBC's guidance, home insurance is not a maintenance policy: it excludes damage from wear and tear, and structural failures caused by neglect or faulty workmanship are rarely covered, whether or not a contractor was involved.
That has a practical consequence. Your protection against poor workmanship does not come from your insurer. It comes from:
- a detailed written contract and scope,
- a permit and the municipal inspections that go with it,
- the way you structure payments,
- and the track record and accountability of the builder you hire.
Permits and inspections are part of your risk plan
In Toronto, a building permit is required for any material alteration to a structure, including structural changes, additions, basement finishes and changes to mechanical and plumbing systems. The City notes that skipping required permits can mean delays, legal action or having to remove completed work. Unpermitted work is also a poor starting point for any insurance conversation. If you are planning an addition, our guide to Toronto addition permits, zoning and committee of adjustment walks through the approvals side, and the difference between permit drawings and construction drawings explains what the City reviews versus what the crew builds from.
Paying safely: deposits and holdbacks
How you pay is a form of protection too. The Government of Ontario's advice before starting a home renovation is never to pay the full cost upfront. It recommends a deposit of no more than 10 per cent and holding back 10 per cent of the contract price for 45 days after completion, as a safeguard against unfinished work or later liabilities.
A payment schedule tied to completed milestones, rather than dates, keeps your money aligned with what is physically on site and insured. Our breakdown of fixed price versus cost-plus contracts in Ontario covers how the contract type changes your exposure to overruns.
WSIB: a related question homeowners ask
Workplace injury is a different risk from property damage, but homeowners often ask about it in the same breath. According to the WSIB's clearance certificate policy, homeowners are generally exempt from obtaining a clearance certificate when directly hiring contractors for exempt home renovation work in an occupied residence, but that exemption does not extend to subcontractors. Check whether your project qualifies, and ask your main contractor how they manage their own WSIB obligations and those of their trades. If you are unsure how it applies to your project, call the WSIB directly.
Perspective: how we handle insurance on a full-home project
We see the insurance conversation go wrong in one consistent way: nobody has it. The homeowner assumes the builder's policy covers the house. The builder assumes the homeowner has told their insurer. The insurer has heard nothing at all. Everyone finds out at claim time.
So we treat it as a project-management question, not a paperwork one. On a full-home renovation or addition, one accountable person should own the question from the feasibility stage: what is being built, who insures what during construction, what the homeowner's insurer needs to be told, and what changes at completion. At Y&CO Build, that person is me. You deal with one point of contact, and the insurance questions are raised before the first demolition day, not after.
My advice is simple. Call your broker early, with your scope and schedule in hand. Ask for answers in writing. Ask every contractor you interview who arranges builder's risk and how it appears in the quote. And do not move out of a gutted house in January without confirming how your policy treats it.
— Cory
Keeping records that make a claim easier
Claims take time. The FSRA's 2024 home insurance thematic review found that, overall, insurers are working to provide fair resolutions, while flagging areas of potential risk to consumers. Supply chain issues and skilled labour shortages have also pushed processing times up, so prepare for delays and document carefully.
A simple record system pays off:
- Before the work: dated photos and video of every room, plus the exterior and mechanical rooms.
- During the work: weekly progress photos, especially of anything that will be covered by drywall, such as framing, wiring, plumbing and insulation.
- Paper trail: signed contract, permit, drawings, change orders, certificates of insurance, invoices and proof of payment.
- Correspondence: keep emails with your insurer and broker, and note the date and name of anyone you speak to by phone.
- At completion: final photos, inspection sign-offs and an updated value for your insurer.
If you want to see how a well-run project is structured from start to finish, our 8-stage renovation process and project management approach show where these checkpoints fall.
A pre-construction insurance checklist
Use this list in the weeks before demolition:
- Call your insurer or broker and describe the scope, schedule and budget.
- Ask whether the home will be treated as vacant or unoccupied, and what that changes.
- Decide who buys builder's risk, and confirm it is in the contract or quote.
- Collect your contractor's certificate of insurance and confirm you are named where appropriate.
- Confirm the building permit is issued before work that requires one begins.
- Set payments at no more than a 10 per cent deposit, tied to milestones, with a holdback at the end.
- Photograph the house as it stands today.
- Set a calendar reminder to update your policy at completion.
Working with a builder who raises this early
A major renovation is a large financial decision, and insurance is one of the quiet details that decides whether a bad day is an inconvenience or a disaster. If you are planning a gut renovation or addition in Toronto or the GTA, we manage the whole process through one accountable contact, from feasibility and budget through permits, design and engineering coordination and construction. You can see how that works on our full-home renovations page, or look at the options for a rear, second-storey or combined addition. If cost is your first question, start with our Toronto renovation cost guide.
FAQ
Do I have to tell my home insurer about a renovation?
For a major renovation, yes. The IBC advises notifying your provider before work begins, and not disclosing it can lead to a denied claim if a loss occurs. Small cosmetic work is a different matter, so ask your insurer where their line falls.
Is builder's risk insurance required by law in Ontario for homeowners?
We are not aware of a general legal requirement for homeowners, and the sources we reviewed describe it as something you may need for major projects. In practice, standard home policies typically exclude construction-related losses, so it is the usual way to cover the structure and materials during a big build. Your broker can tell you what your lender or insurer expects.
Who pays for builder's risk, the homeowner or the contractor?
Either can. The IBC notes that the homeowner can buy it through a broker, or the contractor can arrange it with the cost included as a line item in the quote. Whichever route you take, confirm in writing who buys it, who is named, and what the limits are.
Does my contractor's insurance protect my house?
Not necessarily. A contractor's commercial general liability policy primarily protects the contractor, and your own policy may not cover damage to the structure during a major accident. Ask for the certificate of insurance and ask separately about builder's risk.
Sources
- IBC: Building or Renovating This Spring? Make Sure You're Properly Covered
- City of Toronto: When Do I Need a Building Permit?
- Government of Ontario: What you need to know before starting your home renovation
- WSIB: Clearance Certificate in Construction
- FSRA: Supporting the fair treatment of consumers in Ontario