Insurance for flipping

72 Replies

What type of insurance do you all recommend for short term real estate holding and construction. Liability, etc? Also how do you generally hold title? LLC?

Our plan is to flip and only hold for 4-6 months.

I hold the flip house in an LLC that has no asset. I just do regular fire and storm insurance and pay on every 3 month instead of a year plus vandalism coverage

Anybody have a better way to do this i would love to know as well!

@Will F.  

NREI has the best program for your strategy.  I will send you specific contact info in PM.

Traditional policies require you to purchase a combination of polices depending on the stage the project is in.  Vacant to Rehabbing to rented or back to vacant when finished.  Each of these stages is a separate policy and usually requires a 90 day minimum premium payment.  The NREI policy covers each stage of the process without having to start and stop policies.

Good luck!

@Will F.

For my flips, I use a vacant home policy. A local American Family Insurance agent offers this product for me. I purchase the policy in three month increments and any portion of a policy I don't use after three months is reimbursed back to me. To give you an idea of their pricing, I rehabbed a house that I sold for about $160k and the policy ended up costing me about $600 over 4 months if I recall correctly (I think they base the amount of replacement value of the property, not necessarily your total investment). I'm not sure if this type of product is offered in your area of the US. I will tell you, I had to reach out to several insurance agencies before finding one that would offer this type of product.

Thanks,
Kyle

@Kyle B.  

The vacant building policy is an option, but it is not ideal for flipping.  A vacant policy typically excludes the following,

  • Vandalism
  • Building glass breakage
  • Water damage
  • Theft or attempted theft
  • Sprinkler leakage (unless the insured has protected the building against freezing)
  • A builders risk policy will typically cover these perils.

    An added coverage the Builders risk covers is  "Property in Transit".  Think of picking up windows or cabinets form Home Depot and then getting into an auto accident.  Damage to the windows and cabinets would be covered.  The typical limit for "Property in Transit" is usually $10,000 or $25,000.

    Hope this helps

    The company that @Jason Bott  is referring to is the same company you can find in the profile if @Tim Norris  .

    Builder's risk coverage plus liability coverage is what would be recommended.  You might consider worker comp coverage if there will be people hired who don't carry that coverage. 

    Originally posted by @Kyle B. :

    @Will F.

    For my flips, I use a vacant home policy. A local American Family Insurance agent offers this product for me. I purchase the policy in three month increments and any portion of a policy I don't use after three months is reimbursed back to me. ...

    It is unusual for the unused premium to be refunded for vacant property policies; most insurance carriers consider the premium to be earned in full and non-refundable when coverage is no longer desired. 

    Thanks guys I will likely get a builder's risk and liability insurance.  It's difficult to figure out what insurance is right, especially when we're attempting to squeeze a profit out of this flip.

    I frankly don't want to pay for anything I don't need to.  While at the same time could not afford the risk if something drastic happened. 

    If someone was injured on site and did not have proper coverage I think it could be devastating.  Also, I was even thinking if we eventually stage the house it's quite possible to have vandalism/ theft.

    @Will F.  Once the home remodel is complete, a builders risk becomes void, and you will then need to purchase a vacant building policy.  The NREI program takes this into consideration and covers you through this transition without purchasing a second policy.  That is why the program fits the flipping biz so well. 

    Originally posted by @Will F. :

    ... 

    If someone was injured on site and did not have proper coverage I think it could be devastating.  ...

    There are two broad categories of injuries that can happen at your rehab - a worker gets injured, and a passerby gets injured.  The passerby injuries will generally fall under liability coverage; worker injuries DO NOT fall under liability.  Worker comp coverage is intended to cover worker injuries, so you only want to hire workers who carry worker comp coverage, or have some exemption (in some places a sole proprietor with no employees cannot get worker comp, and some religions like Amish do not believe in that sort of assistance so they are exempt).

    What if your painter guy has a company called "Javier Rodrigues y Rodrigues LLC". Javier is the owner, he is incorporated, he bought workers comp insurance , he even got glossy business cards.

    Every day he swings by Home Defect to pick up some “workers” for painting job he scores around. He shows you proof of insurance (accord form) and you see e.g. $1M in liability and state minimum in workers comp. you check online…wow the policy is not yet cancelled. There is only one problem ..he EXCLUDED himself from the policy to make it cheaper and to show you that he has proper insurance. His guys are covered no question about it…but what about him ?..if he falls down from that bucket onto your newly delivered cabinets and break his leg…

    I am excluded myself from my WC but that fact is not listed on my accord form…

    Lessons learned: you want to rehab houses ? you want to carry your own WC. Of course one might say …oh well he is an independent contractor, you should sign a contract that says blah blah …great ..then I will tell you once you and your attorney will be fighting the case in court and you will be wasting your money and time deliberating contract law and proving that he had his own brush hence he acted as an independent contract and his attorney will be accusing you of negligence as the work place was unsafe ….I will be looking for a next crib to flip while Javier will be collecting $600 a month state money watching Telemundo

    this has been very informative because I am  currently running into the same as issues, because  I am in escrow for my first flip in a not so desirable area.  Please send me the info on NREI.

    Originally posted by @Jason Bott :

    @Will F.  

    NREI has the best program for your strategy.  I will send you specific contact info in PM.

    Traditional policies require you to purchase a combination of polices depending on the stage the project is in.  Vacant to Rehabbing to rented or back to vacant when finished.  Each of these stages is a separate policy and usually requires a 90 day minimum premium payment.  The NREI policy covers each stage of the process without having to start and stop policies.

    Good luck!

    I will start my first flip in the next few weeks. Could you send me the contact as well? Thanks.

    Originally posted by @Steve Babiak :

    It is unusual for the unused premium to be refunded for vacant property policies; most insurance carriers consider the premium to be earned in full and non-refundable when coverage is no longer desired. 

    Unusual indeed, Steve, but it's my understanding that NREI does somehow refund the unused difference.

    Flippers will typically want a liability policy with builders risk and vacant policy coverage as well. Some believe a homeowners policy covers them, but it does not. Also, if you are borrowing money, make sure you speak to your lender to to ensure you meet their minimum requirements, as well. They will want to be named as the mortgagee.

    @Ivan Oberon might want to chime in.

    Originally posted by Jeff S Na:
    Originally posted by @Steve Babiak:

    It is unusual for the unused premium to be refunded for vacant property policies; most insurance carriers consider the premium to be earned in full and non-refundable when coverage is no longer desired. 

    Unusual indeed, Steve, but it's my understanding that NREI does somehow refund the unused difference.

    ...

    NREI collects premiums on a monthly basis, unlike other insurers who collect 3 months of premium at a minimum. Also, if you need coverage for a bit longer, with NREI it is just keep it in place for another month, but other insurers might not be willing to give just another month - they might want their minimum policy term if a renewal is needed. 

    So in the post I made previously that was quoted just now, I was referring to insurers other than NREI when I said unused premiums stay with the insurer rather than being refunded. 

    Hopefully that clarifies my earlier post. 

    I utilize a commercial general liability policy with all my properties under one policy. It runs about $100 per property with $2M aggregate and $1M per occurrence per property. Check your local Farm Bureau agents. My policy is through Western Community and it covers vacant property. Deductible is $500

    Originally posted by @Jeff S  S  S:
    Originally posted by @Steve Babiak:

    It is unusual for the unused premium to be refunded for vacant property policies; most insurance carriers consider the premium to be earned in full and non-refundable when coverage is no longer desired. 

    Unusual indeed, Steve, but it's my understanding that NREI does somehow refund the unused difference.

    Flippers will typically want a liability policy with builders risk and vacant policy coverage as well. Some believe a homeowners policy covers them, but it does not. Also, if you are borrowing money, make sure you speak to your lender to to ensure you meet their minimum requirements, as well. They will want to be named as the mortgagee.

    @Ivan Oberon might want to chime in.

     Thank you Jeff!  Yes, this is correct.  We bill on a simple monthly reporting form so we have no minimum earned premiums, like many others, 25%, 50% or even 100% MEP, we waive any co-insurance requirement if you insure for $45 a square foot or more and you only pay for what you use.  I'm happy to answer any other questions you may have about our national program

    Ivan