What Insurance do I use?

Question

We have our first offer in and it has been accepted. I have been shopping insurance for over a month. I had General Liability, Builders Risk and am waiting on Flood Ins. to be added. It is higher than we originally budgeted. Can anyone advise me on what insurance is a good choice for House Flipping?

John Mocker · Answer

Don,

The Renovation Builders Risk policy rates are going to depend on a number of factors:

1. Value being insured (both for the existing structure and the work being done to it)

2. what type of coverage (Named Perils vs the better, Special Form)

3. Deductible

4. Fire protection of the town

5. Other location factors (wind storm for coastal or tornado areas, wild fire risk, etc.)

The only way to estimate the cost would be to use a similar property's rate in the same town.  If you are concerned that the rate is high, get comparisons (if you are using an independent agent ask what other quotes they got to see how much they shopped it)

For the flood insurance, be sure the agent shopped it with a lot of the "private market" (non FEMA) insurance programs.  I've seen differences of thousands of dollars between the rates on the same property.  These Private Market carriers use their own algorithms to calculate the flood risk so there can be big differences in the rates.

Don Tidwell · Answer

Thank you John, will definitely run the leads you offered.

Hi Kristine, the 150 came from BP webinars. I realized my original numbers would only be a guide until we actually do a flip and will adjust our numbers as we go.   Very thankful for all the advice and suggestions.

Kristine Hodges · Answer

Great advice John.

Where do you get $150 for your budget estimate?  Was it based on a similar property or an agent’s preliminary quote?  You can’t make it be $150 just because that’s the number you picked out randomly.  Your budget estimates need to be based on actual local data.  Insurance rates vary widely based on many factors, so a rule of thumb percentage doesn’t always work well.

Don Tidwell · Answer

Thanks Kristine

General Liability and Builders Risk is quoted at 267.00 per month with Flood Insurance ( We budgeted 150.00 per month based on BP Webinars )

What’s your thoughts?

I’m sorry 267.00 per month without Flood Ins. added in yet

Kristine Hodges · Answer

What is your comparison point for “the quotes are high in my opinion”?  Insurance on a house flip is much different than a homeowners policy for the same property. The premium is higher to account for the risk of liability due to lots of people in a job site with many tripping hazards and other construction site hazards.  The property insurance (builders risk) is much higher due to the increased fire hazard of a building under construction, theft potential due to building materials stored on site but not yet installed that are easier to steal, and many other reasons. You may need to adjust your expectations.  You can try a different broker to get quotes from more companies.  But if your broker already shopped multiple companies, they are presenting you with the best available price and coverage for that property.   Ask for a detailed walk thru of the quote and what specific things are covered and for what cost.  There may be items that don’t apply to your situation that could be removed to decrease the price.  Or at least you will have a better understanding of what is included and the costs involved.  It is a cost of doing business, so be sure to account for it in your analysis up front.

Don Tidwell · Answer

Good morning Nicole and thanks for responding. I would appreciate any and all suggestions, the local insurance company/broker I selected also shops multiple different companies  but the quotes are high in my opinion. Looking for other comparisons. One answer I’m looking for is which type of coverage other flippers use. In researching some suggestions where a General Liability policy, a Builders Risk policy and the home is in a flood zone and I’ll need Flood Insurance

Nicole Harrington · Answer

Our insurance agent checks multiple different agencies, therefore always finds the best rate. He will also adjust if something better comes up. Message me for his info.

What Insurance do I use?

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