Insurance for Ontario Construction Companies

Who This Guide Is For

You've incorporated (Guide 1), registered with CRA (Guide 2), set up your WSIB account (Guide 3), and sorted out any trade-specific licensing (Guide 4). Now you need insurance, the thing that lets you actually walk onto a job site and start working.

Here's the reality: in Ontario construction, insurance is not optional. It is a hard prerequisite, something you must sort out before anything else. Every general contractor, project owner, and institutional client will demand proof of insurance before they'll sign a contract, issue a purchase order, or let you through the gate. No insurance certificate = no work. It has the same gatekeeper effect as your WSIB clearance, but the stakes are even higher because the dollar amounts involved in construction liability claims are enormous.

This guide explains every type of insurance an Ontario construction company needs, what it covers, what it costs, and how to buy it without getting ripped off.

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The Insurance Stack: What You Need and Why

A fully insured Ontario construction company typically carries some combination of these policies:

For a brand-new construction company, here's your Day 1 minimum: CGL + Commercial Auto. Everything else layers on as your business grows and your contracts demand it.

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Commercial General Liability (CGL): Your Core Policy

This is the single most important insurance policy you'll buy. Every other registration, licence, and certification you've obtained is effectively useless without CGL, because nobody will hire you.

What CGL Covers

CGL protects your company against third-party claims for:

1. Bodily Injury (BI) Someone gets hurt because of your work or your operations. Examples:

• A pedestrian trips over your construction materials on a sidewalk
• A client's employee slips on debris you left in a hallway
• A visitor to a building you renovated falls through a floor you weakened during construction
• Dust or fumes from your work cause respiratory issues for adjacent occupants

2. Property Damage (PD) Your work damages someone else's property. Examples:

• Your excavator hits a water main and floods a neighbouring property
• A fire started by your welding operation damages the existing building
• Your demolition work cracks the foundation of an adjacent structure
• A crane you're operating drops a load onto a parked vehicle

3. Completed Operations This is critical for construction. It covers claims arising from work you've already finished and handed over. Examples:

• A roof you installed 6 months ago leaks and damages the building's interior
• A deck you built collapses after the project is complete
• Plumbing you installed fails and causes water damage after occupancy

Without completed operations coverage, your CGL only protects you during construction. The moment you hand over the project, you're exposed. Since most construction defect claims emerge after completion, this is arguably the most important part of your CGL.

4. Personal and Advertising Injury Covers claims of libel, slander, wrongful eviction, or invasion of privacy in the course of your business operations. Less common in construction, but included in standard CGL forms.

What CGL Does NOT Cover

• Your own property: damage to your tools, equipment, or vehicles is not covered by CGL (that's what contractor's equipment and auto policies are for)
• The work itself: if your work is defective and needs to be redone, CGL doesn't pay for the rework. It pays for damage your defective work caused to OTHER property, but not the cost of fixing your own mistake.
• Intentional acts: deliberate damage, fraud, or criminal conduct
• Pollution: standard CGL excludes pollution liability (you need a separate pollution policy if you handle hazardous materials)
• Professional services: if you provide design or engineering services, CGL excludes claims arising from professional errors (you need E&O for that)
• Employee injuries: covered by WSIB, not CGL
• Automobiles: covered by your commercial auto policy

Coverage Limits: How Much Do You Need?

CGL policies have two key limits:

• Per-occurrence limit: the maximum the insurer pays for any single incident
• General aggregate limit: the maximum the insurer pays for all claims in a policy year

Industry standard for Ontario construction:

For a new construction company, start with $2,000,000 per occurrence / $5,000,000 aggregate. This covers most small to mid-size commercial contracts and virtually all residential work. If you're bidding on larger projects, you can increase limits or add an umbrella policy as needed.

Note: ESA/ECRA requires electrical contractors to carry a minimum of $2,000,000 in public liability and property damage insurance as a condition of licensing. If you're an electrical contractor, this is a regulatory floor, not just a market expectation.

How CGL Pricing Works

CGL premiums for construction companies are calculated based on:

• Revenue / Gross receipts: higher revenue = higher premium (because more work = more exposure)
• Type of work: higher-risk trades (roofing, demolition, excavation) pay more than lower-risk trades (painting, flooring, cabinetry)
• Claims history: clean record = lower premiums over time
• Number of employees: more workers = more exposure
• Subcontractor usage: heavy use of subs may increase or decrease premium depending on how it's structured
• Geographic area: urban areas (Toronto) generally higher than rural

Approximate annual CGL premiums for new Ontario construction companies:

These are rough ranges. Your actual premium depends on your specific situation, your broker, and the insurance market conditions (which have been "hard," meaning expensive, for construction in recent years). Shop around. Get at least three quotes.

The Deductible

Your CGL will have a deductible (also called a "self-insured retention" or SIR), which is the amount you pay out of pocket before the insurance kicks in. Typical deductibles for small construction companies: $1,000 to $5,000 per occurrence. Higher deductibles mean lower premiums, but more out-of-pocket risk per claim.

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How to Buy CGL Insurance

Step 1: Find a Broker

Do not try to buy construction CGL direct from an insurer. Construction insurance is a specialty market. Most major insurers (Intact, Aviva, Wawanesa, etc.) don't sell construction CGL directly to the public; they work through brokers who specialize in commercial and construction accounts.

A good construction insurance broker:

• Understands the difference between a GC and a sub, between residential and ICI
• Knows which insurers are competitive for your trade
• Can structure your coverage to meet contract requirements
• Will review contracts to ensure you're not taking on uninsurable risk
• Handles certificates of insurance and additional insured endorsements (you'll need a LOT of these)

Where to find one:

• Ask other contractors who they use (the best brokers in your area are well-known in the trade)
• Insurance Brokers Association of Ontario (IBAO) directory
• Your trade association (if applicable), as many have preferred broker programs with group rates

Step 2: Prepare Your Information

Your broker will need:

• Corporation details: legal name, incorporation date, corporation number, BN
• Business description: what you do, in detail (not just "construction"; they need to know if you do framing, roofing, excavation, interior finishing, etc.)
• Revenue: actual or projected gross revenue for the current year and prior year
• Payroll: total payroll (helps price the policy)
• Number of employees: and whether they perform the work or supervise
• Subcontractor usage: what percentage of your revenue goes to subs, and what trades
• Claims history: any prior insurance claims (if you're new, this is "none")
• Prior insurance: certificate of prior coverage (if transferring from another company or sole proprietorship)
• Types of projects: residential, commercial, institutional, industrial, infrastructure
• Largest project value: what's the biggest single project you'll take on?
• Geographic area: where do you work?

Step 3: Review the Policy

When you get a quote, check for:

• Per-occurrence and aggregate limits: make sure they match or exceed your contract requirements
• Completed operations: confirm it's included and check the time period (some policies have a "sunset" clause)
• Additional insured endorsement: can you add project owners and GCs as additional insureds? (You'll be asked to do this on almost every project)
• Cross-liability / severability of interest: ensures each insured under the policy is treated separately
• Contractual liability: covers liability you assume under contracts (critical for construction, where you routinely sign hold harmless and indemnity clauses)
• Exclusions: read the exclusion list carefully. Common construction exclusions to watch for:
  • Subsidence / earth movement: excluded on some policies (bad if you do excavation)
  • Exterior insulation and finishing systems (EIFS): often excluded due to high claim frequency
  • Hot work (welding, torching): sometimes excluded or sub-limited
  • Asbestos / mould / fungus: typically excluded
  • Residential new construction: some policies exclude it entirely
  • Work performed underground: sometimes excluded

Step 4: Get Your Certificate of Insurance

Once bound, your broker issues a Certificate of Insurance (COI), a one-page document proving you have coverage. You will hand this out constantly. Every GC, every project owner, every client will want one. Your broker should be able to issue certificates quickly; if they take days to produce a certificate, find a new broker.

The COI shows:

• Your company name and address
• Policy number, insurer name, and effective dates
• Coverage types and limits
• Additional insured parties (if any)
• Description of operations

Pro tip: Ask your broker if they have an online certificate portal where you can generate certificates on demand. Some brokerages offer this, and it saves enormous time when you're chasing multiple bids and need certificates fast.

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Builder's Risk / Course of Construction Insurance

What It Is

Builder's risk (also called "course of construction" insurance) covers physical damage to the project itself during construction, before it's completed and handed over. This is different from CGL, which covers damage to other people's property. Builder's risk covers the building, the materials, and the work-in-progress.

What It Covers

• Fire, lightning, windstorm, hail
• Vandalism and theft
• Water damage (burst pipes, flood; varies by policy)
• Collapse during construction
• Transit of materials to the job site
• Temporary structures (formwork, scaffolding, site trailers)
• Soft costs (extended overhead, professional fees, financing costs due to a covered loss)

What You Are Still Carrying Yourself

Every exclusion below is exposure that stays on your balance sheet unless you buy it back by endorsement or price it into the job. Read this list as your own risk register, not as fine print:

• Faulty workmanship (if you build it wrong, that's your problem)
• Normal wear and deterioration
• Land, landscaping, underground utilities (typically)
• Losses due to delay (unless soft cost coverage is added)
• Earthquake (unless added by endorsement)

Who Buys It?

This depends on the contract:

• New home construction: The builder typically buys builder's risk
• Commercial renovation/tenant fit-up: The property owner often carries course of construction coverage, or requires the GC to provide it
• Large ICI projects: The project owner often carries a "wrap-up" builder's risk policy covering all parties
• Cost-plus contracts: Whoever the contract assigns responsibility to

Check your contract. The construction contract will specify who is responsible for builder's risk. If it's you, you need to buy it. If it's the owner, make sure they have it (and that you're named on the policy).

Cost

Builder's risk premiums are typically 1% to 4% of the total project value (excluding land). A $500,000 house build might cost $5,000-$10,000 for builder's risk coverage. A $2M commercial renovation might cost $15,000-$40,000. Premiums vary significantly based on construction type (wood frame vs. concrete), location, and security measures.

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Commercial Auto Insurance

If your company owns, leases, or regularly uses vehicles for business purposes (trucks, vans, equipment haulers), you need commercial auto insurance. This is legally required for all vehicles operating on Ontario roads, but a personal auto policy does not cover business use.

What to Know

• Minimum legal coverage in Ontario: $200,000 third-party liability (but this is far too low for a construction company; industry standard is $2,000,000)
• Covers: Liability for accidents, collision damage to your vehicles, comprehensive (theft, vandalism, weather), accident benefits (for vehicle occupants)
• Fleet policies are available once you have 3+ vehicles, and are typically cheaper per vehicle than individual policies
• Hired auto / non-owned auto endorsement: covers vehicles you rent or employees' personal vehicles used for business. Important if employees ever drive their own car to job sites or run errands for the company.

Cost

Depends heavily on the number and type of vehicles, driver records, and use. A single pickup truck used for construction: $3,000-$6,000/year. A fleet of 5+ trucks: $2,000-$4,000 per vehicle/year (fleet discount). Heavy equipment haulers and dump trucks cost more.

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Contractor's Equipment / Inland Marine

What It Is

Covers your tools, equipment, and machinery, whether at the job site, in your shop, or in transit. This is also called "inland marine" or "contractor's equipment floater."

Why You Need It

Your CGL doesn't cover your own property. If someone steals $30,000 of tools from your job site trailer, or a piece of equipment gets damaged in transit, your CGL won't pay. Contractor's equipment coverage handles this.

What It Covers

• Tools and portable equipment (hand tools, power tools, lasers, testing equipment)
• Heavy equipment (excavators, loaders, lifts, compressors)
• Rented or leased equipment (with the right endorsement)
• Equipment in transit between job sites
• Equipment at your shop or warehouse

What to Know

• Coverage is typically "all-risk", meaning everything is covered unless specifically excluded
• Scheduled vs. blanket coverage: high-value items (over $5,000) are usually individually listed (scheduled), while smaller items are covered under a blanket amount
• Rented equipment: rental companies always require you to carry coverage on their equipment. Either your contractor's equipment policy covers it, or you buy the rental company's damage waiver (which is expensive). Make sure your policy covers rented equipment before you decline a rental waiver.
• Deductibles typically range from $500 to $2,500

Cost

Approximately 2% to 5% of the total value of covered equipment per year. If you have $50,000 in tools and equipment, expect to pay $1,000-$2,500/year.

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Umbrella / Excess Liability

What It Is

An umbrella policy provides additional liability coverage above your CGL and commercial auto limits. It "sits on top" of your primary policies and kicks in when a claim exceeds your CGL per-occurrence limit.

Why You Need It

If you're bidding on projects where the contract requires $5,000,000 or $10,000,000 in CGL coverage, you don't need to buy a $10M CGL policy (which would be very expensive). Instead, you buy a standard $2M CGL policy and add a $3M or $8M umbrella on top. The umbrella is much cheaper per million of coverage than increasing your primary CGL limits.

When It's Required

• Most public sector and institutional contracts over $5M require $5M+ total coverage
• Large GCs may require subs to carry $5M total for projects over $10M
• Infrastructure and heavy civil projects routinely require $10M-$25M

Cost

Umbrella policies for construction companies typically run $1,500-$5,000 per $1M of coverage annually, depending on your trade and claims history. A $5M umbrella on top of a $2M CGL might cost $4,000-$10,000/year.

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Surety Bonds

Surety bonds are a form of credit, sold through insurance brokers as part of the insurance conversation for construction companies.

What They Are

A surety bond is a three-party agreement:

1. Principal: you (the contractor)
2. Obligee: the project owner (the party requiring the bond)
3. Surety: the bonding company (guarantees your performance)

If you fail to perform the contract (you default, go bankrupt, or abandon the job), the surety steps in, either completing the work through another contractor or paying the obligee for losses. The surety then comes after YOU for reimbursement. Unlike insurance, bonds are a guarantee backed by your company's assets and your personal indemnity, and you are ultimately liable for reimbursement.

Types of Construction Bonds

Who Needs Them

• Public sector contracts over $500,000: Ontario's Construction Act requires contractors on government and municipal projects to provide a labour and material payment bond. Many public owners also require performance bonds.
• Institutional clients (hospitals, schools, universities): almost always require bonds
• Large private sector projects: sometimes required, depends on the owner
• Small residential/commercial projects: rarely require bonds

How to Get Bonded

Getting bonded is like getting a line of credit. The surety evaluates:

• Character: your experience, reputation, references, and track record
• Capacity: your ability to perform (equipment, workforce, management capability)
• Capital: your financial strength (working capital, net worth, credit, banking facilities)

For a new company with no track record, bonding is difficult but not impossible. You'll typically need:

• Reviewed or audited financial statements prepared by a CPA
• A personal net worth statement from each principal/guarantor
• Personal indemnity: you (and potentially your spouse) personally guarantee the bond
• Demonstrated experience: even if the company is new, the principals should have years of construction experience
• A banking reference letter showing adequate credit facilities

Bonding capacity is expressed as a maximum single project size and a maximum aggregate of all bonded projects. A new company might start with $500K single / $1M aggregate and build up over 2-3 years of successful bonded work.

Cost

Bond premiums are typically 0.5% to 1.5% of the contract amount. A performance bond on a $1M contract might cost $5,000-$15,000. Bid bonds are often provided at no charge or minimal cost by the surety, with the expectation that you'll buy the performance and payment bonds if you win.

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Professional Liability / Errors & Omissions (E&O)

Who Needs This

Only companies that provide professional services, meaning services that require specialized knowledge, training, or expertise where the risk is in the advice or design, not just the physical work.

You need E&O if you:

• Provide design services (design-build contractors)
• Do engineering work (structural, mechanical, electrical engineering)
• Provide consulting or project management services
• Prepare drawings or specifications that others rely on

You probably don't need E&O if you:

• Only perform physical construction work (building, installing, demolishing)
• Work from drawings and specs provided by others
• Don't provide any advisory or design services

What It Covers

Claims that your professional advice, design, or specifications were negligent, erroneous, or incomplete, resulting in financial loss to the client. Example: you design-build an HVAC system, but your design is undersized, and the client has to spend $50,000 to fix it. Your CGL won't cover this (it's a professional error, not bodily injury or property damage). E&O covers it.

Cost

E&O premiums for construction professionals: $2,000-$10,000/year depending on revenue, type of professional services, and claims history.

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Directors & Officers (D&O) Insurance

What It Is

Protects the personal assets of your corporation's directors and officers against claims that they breached their duties in managing the company. In Canada, directors face potential personal liability for:

• Unremitted payroll deductions (CRA source deductions, covered in Guide 2)
• Unpaid employee wages (up to 6 months under the ESA)
• Environmental contamination
• WSIB premiums
• HST/GST amounts collected but not remitted
• Health and safety violations (personal fines under OHSA, covered in Guide 6)

Do You Need It?

For a sole owner-director, D&O is less critical because you'd be suing yourself. It becomes more important when you have outside directors, investors, or partners, people with personal liability exposure who aren't the sole owner.

For a new one-person company, this is a "nice to have" that can wait. Revisit when you bring on outside directors or partners.

Cost

$1,500-$5,000/year for small construction companies.

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Putting It Together: What to Buy and When

Day 1: Before Your First Project

Approximate Day 1 cost: $5,000-$12,000/year (varies by trade and vehicle count)

Month 3-6: As You Take On Projects

Additional cost: $2,000-$10,000/year (depends on equipment value and project size)

Year 1-2: As You Grow

Additional cost: $5,000-$20,000/year (depends on limits and bonding volume)

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How Insurance Certificates Work on Construction Projects

Understanding the certificate of insurance workflow is critical for construction companies, because you'll deal with it on every single project.

The Typical Flow

1. You bid on a project. The bid documents specify insurance requirements (e.g., "$5M CGL, contractor to carry builder's risk, name Owner as additional insured").

2. You win the bid. Before signing the contract, the owner/GC requests your certificate of insurance.

3. You call your broker. Ask them to issue a certificate naming the owner/GC as an additional insured on your CGL policy for this specific project.

4. Your broker issues the certificate. It lists the additional insured, your policy limits, and the project description.

5. You send the certificate to the owner/GC. They review it, confirm it meets contract requirements, and allow you to proceed.

6. During the project, the owner/GC may request updated certificates (especially if your policy renews mid-project or if there are change orders affecting scope).

7. Certificate renewal. Most policies are annual. When your policy renews, you need to re-issue certificates for all active projects with updated policy dates.

Additional Insured Endorsement

When a GC or owner asks to be named as an "additional insured" on your policy, they're asking your insurer to extend coverage to them for claims arising from your work on their project. This doesn't cost them anything; it's your premium. But it means if someone sues them because of something you did, your policy responds first.

This is standard in construction. Your CGL policy should include a blanket additional insured endorsement, meaning you can add additional insureds without getting insurer approval each time. If your policy requires per-project approval for additional insureds, that's going to slow you down. Ask your broker to fix it.

Waiver of Subrogation

Some contracts require a waiver of subrogation, meaning your insurer agrees not to pursue the additional insured to recover amounts it paid on a claim. This is also standard in construction. Make sure your policy allows it (most do, by endorsement).

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Common Mistakes to Avoid

1. Buying the cheapest policy without reading the exclusions. A CGL policy with a long list of exclusions is worth less than the paper it's printed on. If your policy excludes the type of work you actually do (roofing, excavation, hot work, residential), you're paying for nothing. Read the exclusions. Understand them. Push back on ones that gut your coverage.

2. Not carrying enough coverage for the contracts you want. If you carry $1M CGL and every GC in your market requires $2M, you're bidding with one hand tied behind your back. Match your coverage to your market.

3. Forgetting completed operations. Some cheap CGL policies exclude completed operations or have very short tails. In construction, claims often emerge years after the work is done. Make sure your completed operations coverage extends at least 2-3 years post-completion (longer for structural work).

4. Not getting certificates fast enough. Time kills deals in construction. If a GC awards you a project on Monday and needs a certificate by Wednesday, and your broker takes a week, you might lose the job. Choose a broker who issues certificates within 24 hours.

5. Assuming your sub's insurance covers you. If a sub causes damage on your project, the claim comes to YOU first (you're the GC). Your CGL responds. Then your insurer may subrogate against the sub's insurance. But if the sub is uninsured or underinsured, you're stuck. Always verify sub insurance before they start work.

6. Not budgeting for insurance from Day 1. CGL, auto, and equipment insurance combined can easily be $10,000-$20,000/year for a new company. This is a fixed cost of being in business. Factor it into your pricing; if your bids don't include your insurance cost, you're losing money on every project.

7. Letting policies lapse. A gap in coverage, even a single day, creates an uninsured period. If a claim arises from that period, you have no coverage. Set up automatic payments and renew early. Never let cost concerns cause a coverage gap.

8. Not telling your broker about scope changes. If you start doing roofing but your policy was written for interior renovations, you may have an uncovered exposure. If you start a $5M project but your policy was rated on $500K annual revenue, your insurer may deny a claim for material misrepresentation. Update your broker whenever your business scope or scale changes significantly.

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What This Costs (Summary)

Insurance is a cost of doing business. It's a direct input to your overhead rate and must be factored into every bid. If you're pricing work without accounting for insurance costs, you're underpricing, and that's a path to insolvency.

Tax treatment: All business insurance premiums are fully deductible expenses.

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What Happens Next

With insurance in place, you can now actually work. You have your corporation, your CRA accounts, your WSIB clearance, your trade licences (if needed), and your insurance. The next step is making sure your workplace is safe and legally compliant:

• Guide 6: Safety Compliance: Ontario's OHSA and the Construction Projects Regulation (O. Reg. 213/91) impose specific safety obligations on every construction employer from Day 1. Non-compliance means MOL stop-work orders, personal fines for directors, and claims that your insurance may not cover.
• Guide 7: Operational Setup: Setting up your bank account, accounting, payroll, estimating, and project management systems to actually run the business.