Is insurance needed during rehab on a cash purchase?

Question

Closing on a BRRRR deal in two weeks and I was wondering if I will need insurance during the rehab phase of the deal. Is it ok to wait until I refinance?

Frank Geiger · Answer

If you purchase with cash (not hard money), you do not need insurance. But I think 99% of people would advise against not getting insurance. It can be as cheap as $40/$50 a month. Not worth the risk as others have stated above.

Steve Morris · Answer

Your lender is not requiring insurance?  In any case, if you're doing work to the property get insurance.  The cost is swamped by the potential of loss on the property.

Jeremy Goodrich · Answer

Most of what folks have said makes sense.

1. ALWAYS carry liability coverage.  It's super cheap and covers you from bad things that happen to other people because of you.  Really, don't ever go without this.

2.  Whether to insure the building is a question of protecting your investment.  If you paid $50,000 cash, is $80/month in insurance worth protecting that.  Totally your call.

Hope this helps,

Jeremy

John Teachout · Answer

We don't insure properties during rehab but we also don't have anyone working on them (other than us). I'm a minimalist when it comes to insurance. eg, we dropped the collision insurance on our car when it was 2 years old, etc. I'm not too concerned with a property burning down, mostly concerned about liability.

David M. · Answer

@Jeff Plotkin

If it’s vacant, a Builders Risk policy would be prudent. It’s insurance. Just in case something happens.  Also, in a rehab, one could consider the risk of a fire or injury to be higher since it’s a construction zone.  Maybe you are overhauling the electric but there is an electrical fire, for whatever reason.  May you are NOT overhauling the electric, but there is an electrical fire because you should have overhauled the electric.  The list goes on, but I hope you get the idea

Good lcuk

Jeff Plotkin · Answer

I should have mentioned it is a cash purchase.

Ned Carey · Answer

@Jeff Plotkin How much risk are you comfortable with. How would it affect you if the place burned down during construction. What is a contractor gets hurt. Rehabbing is a very risky business. Yes you should have insurance.

Is insurance needed during rehab on a cash purchase?

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