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title: "Construction Insurance Types Coverage | AVANORTH"
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description: "Construction insurance guide: CGL, builder's risk, WSIB, surety bonds, professional liability, coverage limits, and contractor requirements."
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"og:title": "Construction Insurance Types Coverage"
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AVANORTH Home
**Industry News**·May 29, 2026· 3 min read
# **Construction Insurance: Types and Coverage Explained**
Construction projects face unique risks that require specialized insurance coverage. Understanding the types of construction insurance protects owners, builders, and workers from potentially devastating financial losses.
**AVANORTH Team**
AVANORTH Construction
Construction is inherently risky. A single accident, storm, theft, or design error can cause losses of hundreds of thousands or millions of dollars. Without proper insurance, these losses can bankrupt a contractor, devastate a building owner, or leave an injured worker without support. Construction insurance is not a luxury; it is a business necessity and, in many cases, a legal requirement.
---
## Insurance Types
| Insurance Type | What It Covers | Who Buys It | Required? |
| --- | --- | --- | --- |
| Commercial General Liability (CGL) | Third-party bodily injury and property damage caused by your operations | Contractor | Yes (industry standard, required by most contracts) |
| WSIB (Workers' Compensation) | Workplace injuries and occupational diseases for workers | Employer | Yes (mandatory in Ontario for construction) |
| Builder's Risk (Course of Construction) | Damage to the building project itself during construction (fire, storm, theft, vandalism) | Owner or contractor (varies by contract) | Recommended (required by most construction contracts) |
| Professional Liability (E&O) | Errors and omissions in professional services (design, engineering, consulting) | Design professionals | Required by most professional associations |
| Environmental Liability | Pollution, contamination, remediation costs | Contractor (when working with hazardous materials) | Required for certain project types |
| Automobile Insurance | Company vehicles, driver liability | Contractor | Yes (mandatory in Ontario) |
| Surety Bonds (performance, labour and material) | Guarantee that the contractor will complete the work and pay subcontractors/suppliers | Contractor (for the owner's benefit) | Required on most public projects, common on large private projects |
| Umbrella / Excess Liability | Additional coverage above the limits of CGL, auto, and employer's liability | Contractor | Not legally required but essential for risk management |
---
## Detailed Coverage
### Commercial General Liability (CGL)
CGL is the foundation of a contractor's insurance program. It covers:
- **Bodily injury:** A member of the public or another contractor's worker is injured by your operations (e.g., a pedestrian is struck by falling debris from your scaffolding)
- **Property damage:** Your operations damage another party's property (e.g., your excavation damages an adjacent building's foundation)
- **Completed operations:** Claims that arise after the project is complete (e.g., a deck you built collapses two years later, injuring the homeowner)
- **Product liability:** A product you installed or supplied causes injury or damage
### Typical CGL Limits
| Contract Size | Typical CGL Limit Required |
| --- | --- |
| Small residential (<$500K) | $2 million per occurrence, $5 million aggregate |
| Medium commercial ($500K-$5M) | $5 million per occurrence, $10 million aggregate |
| Large commercial/institutional ($5M+) | $10-25 million per occurrence (using umbrella to achieve the limit) |
---
## Builder's Risk Insurance
> **Critical Coverage Gap:** The building under construction is not covered by the owner's property insurance (it is not yet a completed building) or the contractor's CGL (CGL covers damage you cause to others, not to your own work). Builder's risk fills this gap, covering the project itself against physical loss or damage during construction.
### What Builder's Risk Covers
1. **Fire:** The number one cause of construction losses
2. **Storm and wind damage:** Partially completed structures are vulnerable to wind loads they are not yet designed to resist
3. **Theft:** Materials and equipment left on site
4. **Vandalism:** Damage by trespassers to an unsecured site
5. **Water damage:** Rain or flooding entering an incomplete building (before the roof is on)
6. **Collapse:** Structure collapse during construction
---
## Surety Bonds
| Bond Type | Purpose | Amount |
| --- | --- | --- |
| Bid bond | Guarantees the contractor will enter into the contract if awarded the bid and provide the required performance bond | Typically 10% of bid price |
| Performance bond | Guarantees the contractor will complete the work in accordance with the contract | 50-100% of contract price |
| Labour and material payment bond | Guarantees the contractor will pay subcontractors and material suppliers | 50-100% of contract price |
> **AVANORTH Insurance:** We maintain comprehensive insurance coverage on every project: $5 million CGL, WSIB clearance, builder's risk (or we verify that the owner's builder's risk covers our work), and bonding capacity for projects that require it. We ensure every subcontractor on our sites carries adequate CGL and WSIB coverage. We provide certificates of insurance to our clients and require them from every subcontractor before they begin work.
#insurance #risk-management #surety-bonds
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