Liability Insurance

8 Replies

The city I am rehabbing in requires me to have liability insurance and bonding. I am having trouble finding a company that will give house flippers insurance. Does anyone have any suggestions?  Thanks. 

@Christine Terrano

I will PM you details on the insurance program most Flippers use for their insurance.

 This Insurance program has a policy that can insure the property through the different phases of the flip; Vacant, Rehab, back to Vacant or Rented. Most other insurance companies have to start and cancel multiple different policies to do this.

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@Tom Sutherland No.  It is not in Lieu of a Commercial General Liability (CGL) policy the city requires to get bonded. 

You will need both the CGL & the policy covering the property.

Most property policies will exclude Products and Completed operations.  Prod & Comp Ops is the coverage the Commercial General Liability gives you, and what the city wants you to carry.

Its really straight forward. Foremost has a vacant policy that will allow you to do a rehab on it. Communicate with your agent that you will be doing a rehab, give them the scope of the work, they will need to get it approved through the underwriter before the policy goes into place. The shell of the home is the main concern for Foremost, so plan on doing the exterior work of the home 1st. 

On this policy you can get liability, theft, and vandalism coverage which you cant get on a builders risk policy. The minimum earned premium is $250 so either plan on staying on that policy long enough to use up the $250 or you will be charged the remaining if you sell. If you are going to flip it over to a landlord policy after the rehab with Foremost, I have heard that they will waive the remaining amount of the $250 min. earned premium. I would ask your agent about this as I have never asked to have that waived or heard of that until recently.

They will do the personal lines policy even in an entities name, there are no limits o the numbers of policies you can have with them and they will schedule properties up to 35 homes per policy, so better rates and service fees. I also don't believe they have a dangerous breed restriction. There is a lot to like with Foremost. 

Originally posted by @Jason Bott :

@Tom Sutherland No.  It is not in Lieu of a Commercial General Liability (CGL) policy the city requires to get bonded. 

You will need both the CGL & the policy covering the property.

Most property policies will exclude Products and Completed operations.  Prod & Comp Ops is the coverage the Commercial General Liability gives you, and what the city wants you to carry.

Bingo, that is the missing piece that every flipper must understand, your "completed work" is oft excluded in a "real estate investor" type insurance product. A flipper is indeed a real estate investor, but they have additional exposures that align them more with a construction company in the eyes of many insurance carriers. It's worth time to dialogue to an agent on what exactly is the scope of work, are you physically performing the work, hiring a GC etc..

Originally posted by @Kevin R.:

Its really straight forward. Foremost has a vacant policy that will allow you to do a rehab on it. Communicate with your agent that you will be doing a rehab, give them the scope of the work, they will need to get it approved through the underwriter before the policy goes into place. The shell of the home is the main concern for Foremost, so plan on doing the exterior work of the home 1st. 

On this policy you can get liability, theft, and vandalism coverage which you cant get on a builders risk policy. The minimum earned premium is $250 so either plan on staying on that policy long enough to use up the $250 or you will be charged the remaining if you sell. If you are going to flip it over to a landlord policy after the rehab with Foremost, I have heard that they will waive the remaining amount of the $250 min. earned premium. I would ask your agent about this as I have never asked to have that waived or heard of that until recently.

They will do the personal lines policy even in an entities name, there are no limits o the numbers of policies you can have with them and they will schedule properties up to 35 homes per policy, so better rates and service fees. I also don't believe they have a dangerous breed restriction. There is a lot to like with Foremost. 

This is incorrect. Foremost vacant home coverage does not cover theft and in fact only covers fire, explosion, lightning, windstorm, hail damage and vandalism. This policy will depreciate the materials used in the rehab in the event of a loss meaning you will be given less than you paid. The liability provided in Foremost's vacant home insurance does not cover damage resulting from construction or completed operations. 

Builders risk coverage replaces materials at their cost, covers not only theft of your materials but theft of other contractors materials and is generally less expensive or very similar to vacant home premium. Builders risk also covers earthquake, waterbackup and equipment breakdown.  The liability insurance provided from your homeowners policy provides the same protection as a vacant home policy. However, I would recommend looking into a policy that covers losses from construction and completed operations. 

My guess is the surety bond guarantees that you will abide by the laws and regulations associated with a remodel. This should be pretty simple to get and cost around $50.