I'm currently closing on my first flip house. Its a 1350 sq ft single family home in the Houston area and needs mostly cosmetic work. My hard money lender requires I have homeowner insurance so I started by getting a quote from my agent for my primary residence policy. He is offering a "Vacant Property Quote" which covers 80% of the ARV (ARV is 130,000) for the dwelling and $300K liability, 3 month term and it is fully earned, for almost $800.
This is my first flip, but this seems pretty expensive to me for a 3 month policy. Can anyone let me know if I'm looking at the correct type of coverage for a flip, and can anyone in the Houston area comment on the cost? Thanks!
You need builders risk insurance.
@Jason Baehr there is an insurance program that will bill on a monthly basis and the property can be vacant or being rehabbed. I will PM you the info.
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Call an independent agent and compare. Every state is different for insurance so what works in other states may be a little different. I am in Texas and get builders risk insurance like Wayne mentioned. My independent agent gets it through Tapco. Most agents will not have something available that will cover theft. I always get it added with tapco. you can also add liability. I've never had to make a claim.
I'd look into a 6 month policy. On the ones I get it is 50% earned so if you can only get a 3 month refund. Typically 1 month rehab, 1 month sales and 1 month close, so you use 3 months (or a little less). in my experience 6 month policies are prices better than 3.
I just bought a 6 month policy for $109k in Denton county Tx for $800 with $5k theft added.
Call Patriot Insurance here in Houston lot of us use them for short term insurance when flipping houses.
Originally posted by @Jason Baehr :
... My hard money lender requires I have homeowner insurance so I started by getting a quote from my agent for my primary residence policy...
Did you mean builder's risk?
@Jason Baehr we have also been using Tapco, and I agree that the six month policy is the way to go. I may check out patriot next time. What part of spring is the house located?i may have an interested buyer.
Jason, I am a hard money lender in Virginia. I am quite familiar with most of the insurance policies for fix and flip deals. By far the best or most comprehensive coverage at the lowest cost is a commercial lines policy issued by Erie Insurance ( Erie is a superior policy to Zurich, USLI, American Modern Insurance Group, Llyod's of London, and all of the captive insurance policies). The Erie policy has both commercial general liability and builders risk coverage. The policy covers all of the risks that a fix an flipper is subject to, covers a 12 month period and costs anywhere from $500 to $600 per year for a $200,000 ARV home. Any unused portion of the premium (unearned premium) is refunded to the owner of the policy. Look up local insurance brokerage firms to see if they can sell this policy to you. Captive insurance agents such as State Farm, Nationwide and others will sell you their own product and that will likely sell a personal lines policy which is not what you want. Best of luck to you.
Thanks everyone for the great input!
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