Insurance Considerations During a Church Building Project

Insurance is rarely the most exciting topic on a building committee's agenda—it has never once received a standing ovation at a congregational meeting—but it is one of the most important. A church construction project involves millions of dollars in materials, equipment, and labour, all exposed to risk from weather, theft, accidents, and unforeseen events. The wrong insurance arrangement, or worse, a gap in coverage that nobody noticed, can turn a manageable setback into a financial crisis.

In our fifty years of managing church construction across Ontario, we have seen the consequences of both well-planned and poorly planned insurance programs. This article walks through the key insurance considerations that every church building committee should understand before ground is broken.

Builder's Risk Insurance: The Foundation of Construction Coverage

Builder's risk insurance, sometimes called course of construction insurance, is the primary policy that protects the building itself while it is under construction. It covers physical loss or damage to the structure, materials on site, and materials in transit from covered perils such as fire, wind, hail, vandalism, and theft.

The critical question is: who carries the builder's risk policy? In most church construction projects in Ontario, the contract will specify whether the owner (the church) or the general contractor is responsible for providing this coverage. There are good arguments for either approach, but the church needs to understand the implications of each.

When the contractor carries builder's risk, the cost is typically included in the contract price. The advantage is simplicity: the contractor manages the policy, and the church does not need to coordinate with its own insurance broker. The disadvantage is that the church may have less control over the policy terms, limits, and deductibles, and the church's interests may not be fully protected if a claim arises.

When the church carries builder's risk, the church's insurance broker arranges the policy, and the church has direct control over coverage terms. This approach is often preferable for larger projects because the church can ensure that the policy is tailored to its specific needs and that both the church and the contractor are named as insured parties. Your broker will need detailed project information, including the construction value, timeline, building type, and site conditions, to arrange proper coverage.

What Builder's Risk Typically Covers

• The building under construction, including foundations, structural elements, and finishes
• Materials and supplies stored on site or in transit to the site
• Temporary structures such as scaffolding and formwork
• Soft costs such as architectural fees, permits, and interest on construction financing that may need to be re-incurred if a loss occurs

What Builder's Risk Typically Does Not Cover

• Damage caused by faulty workmanship or defective materials (though resulting damage may be covered)
• Normal wear and tear or gradual deterioration
• Land and site improvements that existed before construction began
• Contractor's tools and equipment (these are often covered under an equipment floater or the contractor's own policy)

General Liability During Construction

General liability insurance protects against claims of bodily injury or property damage to third parties. During a construction project, the risk of such claims increases significantly. A visitor to the church property could be injured by construction activity. A neighbouring property could be damaged by equipment or excavation work. A passerby could trip on construction debris near the sidewalk.

Your general contractor is required to carry Commercial General Liability (CGL) insurance, and Ontario construction industry standards typically require a minimum of five million dollars in coverage. However, the church also needs to ensure that its own CGL policy remains in force and that it adequately covers the church's exposure during the construction period.

If the church is acting as its own general contractor, which we strongly advise against but some churches attempt, the church takes on the full liability exposure of the construction project. This requires significantly higher insurance limits and potentially an umbrella or excess liability policy.

Gaps in Existing Church Insurance Policies

One of the most common mistakes we see is the assumption that the church's existing property and liability insurance will simply continue to cover everything during construction. We understand the optimism—it is a church, after all—but faith and insurance work best when they complement each other, not substitute for one another. In reality, most standard church insurance policies have significant limitations when it comes to active construction.

“Faith and insurance work best when they complement each other, not substitute for one another. A church construction project involves millions of dollars in materials, equipment, and labour, all exposed to risk.”

If the church is vacating the building during construction, the vacancy clause in your property policy may apply. Most property insurance policies reduce coverage or exclude certain perils, such as vandalism and water damage, if the building has been vacant for more than thirty consecutive days. Discuss this with your broker well before the building is vacated.

Contents coverage is another area that needs attention. If church furnishings, office equipment, or other contents are being stored off-site during construction, verify that your contents coverage extends to the storage location. Items in a rented storage unit may not be covered under your standard policy without an endorsement.

Professional Liability for Architects and Engineers

Professional liability insurance, often called errors and omissions (E&O) coverage, protects against claims arising from professional negligence by your design team. If the architect's design contains an error that results in structural problems, water infiltration, or code violations, professional liability insurance is what responds to cover the cost of correction.

Before signing any design contract, verify that your architect and all consulting engineers carry professional liability insurance with adequate limits. For a typical church project in Ontario, we recommend minimum limits of two million dollars per claim. Ask for a Certificate of Insurance confirming coverage, and ensure the policy will remain in force for at least two years after project completion, since design defects often do not become apparent until the building has been in use for some time.

Note that professional liability is a claims-made policy, meaning it responds to claims made during the policy period, not to events that occurred during the policy period. If your architect lets their policy lapse after your project is complete, you may have no recourse for a design defect discovered later. This is why the post-completion coverage period matters.

Wrap-Up Insurance Programs

On larger church construction projects, typically those exceeding five million dollars, a wrap-up insurance program may be worth considering. A wrap-up policy, also known as an Owner Controlled Insurance Program (OCIP) or Contractor Controlled Insurance Program (CCIP), provides a single insurance program that covers all parties involved in the construction project under one policy.

The advantages of a wrap-up include consistent coverage across all contractors and subcontractors, elimination of coverage gaps between different policies, potential cost savings through volume purchasing, and simplified claims management. The disadvantages include higher administrative complexity and the need for a knowledgeable insurance broker to manage the program.

For most church projects, a wrap-up is not necessary. The standard approach of requiring each contractor to carry their own insurance, coordinated through proper certificate verification, works well for projects in the two to ten million dollar range that is typical for Ontario church construction.

Ontario-Specific Requirements: WSIB Coverage

In Ontario, the Workplace Safety and Insurance Board (WSIB) provides workplace injury insurance for workers in the construction industry. WSIB coverage is mandatory for construction employers in Ontario, and it is the church's responsibility to verify that every contractor and subcontractor working on the project has active WSIB coverage.

Before any contractor begins work on your site, obtain a WSIB Clearance Certificate confirming that the contractor is registered, in good standing, and has no outstanding premiums owing. This certificate can be verified online through the WSIB website. If a contractor is working on your site without valid WSIB coverage and a worker is injured, the church, as the project owner, could be held liable for the claim costs.

Your construction manager should maintain a current WSIB Clearance Certificate for every contractor and subcontractor on the project and should verify these certificates regularly, as they have expiration dates. This is one of the administrative tasks that a professional construction manager handles routinely, and it is one of the many reasons we recommend using experienced construction management for church projects.

Verifying Your Contractor's Insurance Certificates

Every trade contractor and subcontractor working on your church project should provide a Certificate of Insurance before beginning work. But simply collecting certificates is not enough. You need to know what to look for and what questions to ask.

A proper Certificate of Insurance for a construction contractor in Ontario should confirm the following:

• Commercial General Liability with a minimum limit of five million dollars, including products and completed operations coverage
• Automobile liability for all vehicles used on or near the site
• The church should be named as an Additional Insured on the contractor's CGL policy
• A cross-liability clause, which ensures that the insurance treats each named insured as though they had their own separate policy
• A requirement that the insurer provide the church with thirty days' written notice of cancellation or material change to the policy

Review the certificate carefully. Check that the policy dates cover the full period of the contractor's work on your site. Confirm that the policy limits are adequate. Verify that the named insured on the certificate matches the legal name of the company you have contracted with. If anything looks uncertain, ask your insurance broker to review the certificate on your behalf.

Theft and Vandalism Coverage During Construction

Construction sites are unfortunately attractive targets for theft and vandalism. Copper wire, HVAC equipment, power tools, and building materials all have resale value, and an unoccupied construction site is vulnerable, particularly at night and on weekends.

Your builder's risk policy should cover theft and vandalism, but review the policy terms carefully. Some policies have sub-limits for theft, meaning the maximum payout for a theft claim is lower than the overall policy limit. Some policies require specific security measures, such as fencing, lighting, or alarm systems, as a condition of coverage. If your site is in an area with higher crime risk, discuss additional security measures and their insurance implications with your broker and construction manager.

Ontario churches should also be aware that theft of building materials has become increasingly common in recent years, particularly copper and mechanical equipment. Your construction manager should implement practical security measures including perimeter fencing, motion-activated lighting, security cameras, and controlled access to the site. These measures not only reduce risk but may also lower your insurance premiums.

Working with Your Insurance Broker

Your insurance broker is a critical member of your project team, even though they are not often thought of that way. A broker who understands construction insurance and has experience with institutional or non-profit clients can save your church significant money and protect against coverage gaps that a general insurance agent might miss.

Engage your broker early, ideally during the design phase, well before construction begins. Provide them with the full project details: construction value, timeline, project delivery method, list of major contractors, and any unusual site conditions. Ask them to review the insurance requirements in your construction contracts and confirm that the requirements are adequate and achievable.

If your current broker does not have specific experience with construction insurance, consider consulting a specialist broker for the construction-related coverages while maintaining your regular broker for ongoing church operations. The construction period is not the time to rely on a generalist who is learning on the job.

Transitioning to Permanent Property Insurance

When construction is complete and you receive your occupancy permit, the builder's risk policy ends and your permanent property insurance takes over. This transition needs to be carefully coordinated to avoid any gap in coverage.

Notify your insurance broker well before the expected completion date so that your permanent property policy can be updated to reflect the new building value. The insured value of your property will have changed significantly, and your premium will adjust accordingly. Make sure the effective date of the updated permanent policy aligns with the termination of the builder's risk policy.

Your updated property policy should reflect the full replacement cost of the completed building, including all improvements and additions. This is not the same as the construction cost. Replacement cost for insurance purposes may be higher or lower than what you actually paid to build, depending on market conditions. Your broker or a professional appraiser can help determine the appropriate insured value.

Finally, update all other insurance coverages to reflect your new facility. This includes contents coverage for new furnishings and equipment, boiler and machinery coverage for new HVAC and mechanical systems, and any endorsements needed for specialized features such as stained glass, pipe organs, or commercial kitchen equipment.

Insurance may not be glamorous, but it is the safety net that protects your congregation's investment. The right insurance program, properly coordinated between the church, the contractor, and a knowledgeable broker, provides peace of mind throughout the construction process and beyond. If you have questions about insurance planning for your upcoming church building project, we are always happy to help you think it through.