Approrpriate Insurance Policy for House Flipping

[Account Closed]

My partner and I are working on getting offers out soon for distressed properties to rehab and resell. In the meantime, we're making sure we have the appropriate insurance lined up to protect ourselves should things (as they often do) go awry.

We plan to hire a general contractor to manage the rehab project and ensure he has designated our LLC as additionally insured.

We will definitely purchase either a Builder's or Vacant Home policy depending on the work necessary to complete the rehab. In your opinion, should we purchase a CGL (commercial general libaility) policy as well? What kind of incidents would a CGL policy protect us against that a Builder's/Vacant Home policy wouldn't?

[Jason Bott]

@Account Closed  CA has some liberal building defect laws that may constitute taking out a CGL policy for the business entity.  Talk with an experienced flipper in CA to see if this is the case.

Besides that point, a CGL policy protects you against claims of "Property Damage" and "Bodily Injury". Since your LLC will not be doing work for others, it is hard to come up with a specific claim that will not be picked up by the property policy or GC's coverage.

In flipping, the work comp risk can be greater than the extra CGL policy. If the GC's work comp policy cancels and there is a claim before you are notified, that could hit the LLC directly. Your Builders Risk/vacant policy will not respond to work comp claims.

You should also note,

*the builders risk policy is only property coverage, and you would need to purchase a separate "premises liability".  

*Some vacant building policies do not cover the property when being rehabbed