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What is construction insurance?

Construction insurance is a must-have for contractors who want to properly manage risks during their construction projects.

It covers unexpected events like storms, theft or accidental damage, acting as a safety net so you can focus on building without constant worry. With construction insurance, your project stays on track even when surprises pop up.

Construction insurance covers various policies to protect you and your business from specific risks in your work. If you accidentally damage a client's floor by dropping a tool, for instance, your commercial general liability insurance will cover the repair costs. Your construction insurance usually includes tools and equipment coverage. You can also add extra protection, like commercial property insurance, to protect your office, warehouse or storage facility from accidents.

Who needs construction insurance?

Anyone working in a construction-based business will need a construction insurance package. Some of the professions include:

  • Independent contractors: If you're working solo, as a freelancer or a sole proprietor, you'll want this insurance.
  • Construction companies: If your business offers various construction services to residential and commercial clients, this insurance is crucial.
  • Subcontractors: If you are hired for specific tasks in larger projects, you'll need your own insurance since you're not an employee of the general contractor.

What does construction insurance cover?

Construction insurance protects your business by covering:

  • Commercial general liability: Often required, it guards against financial losses from third-party property damage or injury claims. If your work causes damage, this helps manage the claims. You can apply coverage limits to all employees or individually, though more employees usually mean higher premiums.
  • Professional liability: Also known as errors and omissions (E&O) insurance, it covers claims of professional mistakes or negligence. If a client claims your work didn’t meet standards, this covers the related costs and lawsuits.
  • Tools and equipment: This reimburses you for lost, stolen or damaged tools and equipment. Items valued under $1,500 fall under the ‘tools’ category, while higher values are considered ‘equipment.’ Check the policy details for classification and coverage specifics.
  • Builder’s risk: It covers damage or loss to buildings under construction, protecting against risks like natural disasters, fire and theft.
  • Workers’ compensation: Mandatory in most areas for businesses with employees, it covers medical bills and lost wages if an employee gets hurt on the job.

What are some recommended add-ons for construction insurance?

Consider these add-ons based on your business needs:

  • Commercial property insurance: This protects your business premises, like an office or warehouse, and its contents. For example, if water damage occurs, this insurance covers repair and replacement costs.
  • Commercial auto insurance: If you have company vehicles, it covers accidents, theft or damage. If your service van gets into an accident, this insurance helps with repair costs and damage to your work supplies.
  • Business interruption insurance: This one protects against income loss from unexpected events like fires, floods and other covered perils. For instance, if a fire stops your project, this will help cover expenses like rent and salaries.

How much does construction insurance cost in Canada?

The cost of construction insurance in Canada varies based on several factors, such as the size of your business, the services you provide, your claims history and the type of coverage you select. Here are some general estimates:

  • General liability insurance: Usually starts at about $450 per year for $2 million in coverage.
  • Comprehensive insurance packages: Can start at around $575 per year.

What factors determine construction insurance rates?

The price of construction insurance in Canada depends on different factors:

  • Business equipment and property: The value and type of equipment you use can affect your insurance costs. More expensive or specialized equipment will raise the premiums as they are more costly to replace.
  • Revenue: Higher business revenue can increase your insurance quotes because insurers see it as more risk, as you're handling more and larger projects.
  • Deductible: The amount you pay out-of-pocket before insurance kicks in. A higher deductible will lower your premium since the insurer will pay less in case of a claim.
  • Location: Your business location can affect costs. Busier areas with more people or those prone to natural disasters are often riskier to insure.
  • Years in operation: Established businesses with a good track record often receive lower premiums than newer ones.
  • Claims history: Frequent claims will increase your insurance costs over time.

How does construction insurance work?

Construction insurance provides financial protection against unexpected incidents. When you file a claim, your insurer assesses the situation, and if it’s covered, they pay for expenses up to your policy’s limits. This helps you manage losses and keeps your business running smoothly.

How to get the cheapest construction insurance quote?

To get the cheapest construction insurance quote in Canada, consider these steps:

  • Compare multiple quotes: Use online platforms like RATESDOTCA to compare quotes from different insurers and find the best rate.
  • Bundle policies: If you need multiple types of insurance (like general liability and commercial auto), getting them from the same provider can often result in discounts.
  • Increase your deductible: Opting for a higher deductible can lower your premium. Ensure you can afford the deductible if you need to make a claim.
  • Maintain a good claims history: A good claims history can lead to lower rates. Implement safety measures to reduce accidents and claims.
  • Choose the right coverage: Only pay for the coverage your business needs. For instance, if you don’t use vehicles for your business, you can skip commercial auto insurance.
  • Ask about discounts: Some insurers offer discounts for paying annually instead of monthly or maintaining a good safety record.

Frequently asked questions about construction insurance

Is there anything that construction insurance would not cover?

Yes, there are usually some things not covered, such as: 

  • Damage done on purpose or illegal activities. 
  • Normal wear and tear or maintenance-related issues. 
  • Certain high-risk projects or hazardous materials. 

Make sure to read your policy carefully to understand what's not covered. 

What should you do if you need to make a claim?

To file a claim: 

  • Notify your insurance company immediately after an incident. 
  • Provide detailed information about the incident, including photos and witness statements if available. 
  • Complete any claim forms provided by your insurer. 
  • Cooperate with the insurer's investigation and check in regularly. 

What claims should you watch out for in your construction business? 

As a construction business owner, there are a few common claims you should be aware of: 

  • Property damage: This could occur if you're working on a project and accidentally damage a client's property. 
  • Bodily injury: Someone could get hurt due to falling debris or misplaced equipment on your job site. 
  • Equipment theft or damage: Your expensive construction equipment could be stolen or damaged while on the job.

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