Insurance

18 Replies

Hey all,

Im fairly new to this site but was wondering if I could get some help. Im recently purchased a property to flip in Minneapolis. What is the best route to go for getting insurance on it? It is a bigger project that will have an almost full rehab, 3 month timeline. I contacted my insurance company I use for my personal house a some of my rentals and they are quoting me for the vacant home and its really expensive, my agent doesn't seem too experienced with investment properties. Is there a better way to do this, or does anyone know a good insurance agent in the Minneapolis area? 

Thanks

Brandon

Hi Brandon.

I'm also new and here and certainly no expert on insurance, but when I did a rehab that I wasn't living in I had to get what they called a builders risk policy. It certainly wasn't cheap but I picked a very short term for the policy. I live in Florida and I'm not sure if things are different where you are. One thing you could do although it is risky and not necessarily a good idea, is buy a one month policy and then let it expire without renewing it. If your loan is with a bank they will likely send you letters about the loan contract requiring you to have insurance. If you don't get any they will buy it on your behalf. However, by the time they send you all these letters and put that in motion you could be done with the rehab and get a standard policy. The issue with that plan is there is no guarantee that the project will happen as quickly as you like. And you put yourself at risk should something happen while you're not covered. Also you have to be able to be ok with the fact that you knowingly breeched the agreement with the bank about keeping coverage on the property. I dont recommend this but it has been done. Check out builders risk policies and get quotes from different companies before you make a decision. Good luck man.

Thanks Matt,

Ive heard of some people doing builder's risk, Im curious on how much cheaper that is than vacant home. Ill have to look into it with a couple different companies. We don't have a loan on the property so we wouldn't have to worry about any angry letters from the bank.

Hi Brandon,

If the quote you are getting is "really expensive," then I would suggest you shop around. I don't know your local area, but there are plenty of national insurance brands, like Allstate, Geico, State Farm, etc., and you can just call them up and get quotes.

It's quite common to own investment properties, so I wouldn't expect you to need a special "investor friendly" insurance agent to work with. I called up my agent before buying my first flip and went over my business plan and asked him for some quotes on a hypothetical house. It was about what I expected, and was only going to cost me a few hundred bucks out of pocket when all was said and done. My agent also acted like this was no big deal, they insure this kind of risk all the time.

Before you ask, my agent works with Erie, it's a smaller insurance company that doesn't operate in Minnesota. Sorry! But you might want to look around and see if there's a smaller regional company that can offer you better rates than the national companies.

  -Josh

Here is the guys I use and I think a lot of others on the site have used them as well.  There programs are specifically for flips.

http://www.nreinsurance.com/

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Here is an example of the last policy I got in South Florida: Builders Risk/Vacant Building: Structure covered for $128,000, $500,00 Liabilty, $500 Deductible, Windstorm Ded. 5%: Cost for 3 months $433 cost for 6 months $849.

I would always recommend getting Insurance and hope you never have to USE IT.

Wow, thats awesome thanks everybody. I will check all these out. This site is fantastic.

@Brandon Giarusso I have used Real Protect in the past - www.realprotect.com.  On my most recent flip I paid a premium of $160/mth for $500k in coverage.

I have also heard that Foremost has a good vacant home policy but I have not used them yet.

Best of luck on your first flip!

@Brandon Giarusso

 I use a local Insurance Broker out of Minneapolis for insurance during the remodel phase. Typically it seems to be about twice the price of normal home owners, but since it's short term and I haven't found any other options this is what I have settled with. If you want to get a bid from my guy, send me a PM and I'll send over his contact info. 

Cheers, Sawyer 

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http://www.nreinsurance.com/ is who I use as well.

I have 4 policies with them right now. 3 rentals and a rehab. Probably not the cheapest overall but they have pretty good customer service and are easy to work with. My current project has $1M liability and RC at $225k, I pay $191/month. 

I have used both Foremost and Farmers for vacant homes under rehab. Pretty reasonable. Average $900 - $1000 / year - I get a refund when I sell since I never keep a flip for more than 4 months.

I have used Foremost (which I get through my local Farmer's agent). It is a vacant home policy and I am very clear and upfront with the agent as to my intentions for the property. i.e. she knows it is a flip and I have to tell her the types of updates that will be made to the house. 

As @Ruth Bayang stated, I get it for a year and pay month to month. When I cancel the policy they refund me whatever I have pre-paid for the month. 

I've used Evergreen Insurance for all my investment properties. They have a special program for fix & flips. http://goo.gl/bfXsnc

For example I pay on 200k Replacement Cost $128 per month. I deal with Sol Eisenberg and Gitty Loker. Good luck!

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Brandon,

I am sure your well past deciding on insurance and I hope the rehab is almost done.  

But, I did want to say for the future, nrei as mentioned above is a very common product for the vacant property/rehab.  I would suggest you try to find an Insurance Broker with access to Atain.  Their policy is also specifically designed to cover flippers ie vacant and rehab.  

But, at least in California, it is roughly 15% cheaper and it comes with another added bonus.  Again, I can only speak for California, but I do believe it will be the same nationwide, the NREI product is going to be "month paid in full" meaning if your policy starts October 1st and you sell/rent December 3rd, you will be pro-rated, but you will be charged for the entire month of December.  Whereas the Atain policy will pro-rate you down to the day.  

Best of luck and I hope the rehab hasn't provided too many unwanted surprises.  

I know this is very dated but just wanted to say that this link was very beneficial.  I have been working with my local broker to identify insurance providers with not much luck.  

Thanks for sharing.

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