Do Flippers need to get home insurance on their projects?

Question

Do flippers need to get home insurance on their projects? Typically projects that are bought, flipped and sold within around 4 months from scratch to end.

Nathan Gesner · Answer

Just because it's not required doesn't mean it's not wise. It seems foolish to not have insurance on a property that's actively being renovated. Accidents, electrical fires, and all kinds of mishaps are significantly more likely during rehab than during normal occupancy.

Michael Kiley · Answer

If a flipper pays cash for a property, he's not required to get insurance. When there is a loan, the bank will require it.

Wayne Brooks · Answer

As mentioned, if it’s financed your lender will require it.

If not financed, not getting it would probably be the most foolish thing you could do.

You would want a Builders a Risk policy, not a vacant policy.

Scott P. · Answer

I'd ask my insurance company about a "vacant policy" or a Builder's Risk policy.

I'd get the insurance.  The cost is probably small compared to theft, fire, tornado, etc.

Ryan Ingram · Answer

Vacant policies cover homes under renovations. The two biggest things that you want to make sure of on a vacant policy is that you get one that includes theft and also vandalism and malicious mischief (VMM for short). Most vacant policies are 3, 6, and 12 month terms. If you dig hard enough or find a good independent agent, you can find a company that can be paid monthly.

If you do several flips per year, a blanket builders risk policy would be a good idea. On this, you can add and delete properties. If the premium is over $5,000 annually, monthly reporting can even be an option.

@Wayne Brooks, I’d love to pick your brain about the exclusions and what not you’ve faced on vacant policies and the insurance companies you’ve worked with for both the vacant and builders risk. I’ll send you a message.

Jason Bott · Answer

There are insurance programs specifically for flipping that are month to month billing.  But more importantly, these programs offer coverage during the 3 different possible occupancy periods without needing to change policies.

If you do not go with one of these programs, you typically will have one of the 3 policies to choose from;

Vacant - No occupancy and no renovations allowed

Builders Risk - Property undergoing renovations

Occupied - Either by a homeowner (homeowners policy) or tenant (landlord policy).

I'll send you the companies my clients use for flipping.

Ryan Ingram · Answer

Yes sir! There was a pretty good thread about this not too long ago.

https://www.biggerpockets.com/topics/711343

It’s a pretty solid thread with a lot of differing opinions.

It is called a “vacant policy” and they are generally sold in 3, 6, and 12 month terms.

Some companies offer a monthly option that can be cancelled any time.

Bryan Devitt · Answer

@Rehaan Khan after you see a flip that is a week from being complete burn to the ground you'll never ask that question again. The minimal cost is not worth the risk of losing everything (not my flip thankfully but I got a free lesson out of it)

Do Flippers need to get home insurance on their projects?

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