Insurance

25 Replies

Hello BP community,

I'm planning to do my first flip. Question is about the insurances?

Do I need to get one for the house during the rehab process? Does every one does it? how common is it

About my GC. Does he needs to have insurance? If so; Who should pay for it? him or his employer?

ok so your contractor must carry insurance. Workers comp and liability. 

You should have a builders risk policy.  That covers the stuff like fire and vandalism. It isn't very expensive and it could save your butt.

@Sergio Sifuentes

On your flip, you will want General Liability and Property coverage.  Within the Property coverage you will or will not have coverage for perils (types of claims) such as Vandelism, Water damage, Theft, etc.

On your contractor, Request they have their insurance agent send you a "Certificate of Insurance" showing General Liability and Workers Compensation.  Also ask to be added as an "Additional Insured".  This gives you the right to file claims directly to the contracotrs policy without the contractors consent.

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@Sergio Sifuentes hey there!

I have just done a ton of research on this topic and wanted to pass on my findings! @Jason Bott is absolutely correct. And your contractor should be happy to add you to his policy (so if his worked gets hurt and goes after you as the property owner you are also covered for liability)

Not a lot of companies that cover fix and flips well (which is my market too). I even got a bid from an agent at one company that was literally a Mickey Mouse homeowners! Yikes! Instant excuse to deny liability in the event of a loss.. 

But the good news is I found a company that has a program specifically for fix and flips!. (Recommended by my contractor who is also an investor).. Happy to pass on their info if you want to message me. But their prices are great and more importantly they are insuring for exactly what you are doing.. 

I have been having a hard time finding a builders risk policy. We did 8 flips from 2002 to 2005 then we took a break so I could focus on my new job. Well we're back at it making offers and the company I used doesn't offer the Builders Risk any more.

I was able to find a company that offers a Vacant Home Policy. You can buy 3, 6 or 12 months and renew every three months. Limited coverage but does have liability. This might be the way I go.

@Jason Bott @Christian Sifuentes @Michelle DeWoskin I am interested in the names of companies that others are using. Thanks!

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Not 100% sure of the rules......but here is what I know? Builders risk policies are okay, but they typically do not cover liability. Your taking a big risk without that? Other programs offer liability but exclude theft. Again a bit of a risk especially on a rehab?

Foremost has an excellent program for rehabs under their vacant policy. You need to communicate with the agent that its a rehab and give them the scope of the work. Foremost is mainly concerned with the shell of the home including the roof, being secured and not exposed to weather and or intrusion. Beyond that, they don't have a lot of concerns. Just make the exterior work your 1st priority and get that done timely and underwriting should be fine at that point. They will ask your time frame to get that part done.

You can get liability, theft and vandalism coverage through them. They have a minimum earned premium of $250.00, so I set my flippers up on the policy as a monthly billing and they keep it to the point of the $250.00 before rolling it to a landlord type policy or if they sell, they get billed the remaining of the $250.00. The policy is a yearly renewal policy, so no chasing it down to renew every 3, 6, or 9 months.

I hope that helps?

@Sergio Sifuentes

As everyone has stated, you definitely need a Builder's Risk Policy for your side of things.  Talk to a couple independent agents, there are not a ton of options in terms of carriers, but you want to work with an agent who has some experience with Real Estate Investors.  

For your contractor-- Not only do they need liability and workman's comp, with you added as an additionally insured.  But, for greater protection--make sure you have a written contract, with a "hold-harmless agreement" in your favor.  Ask an attorney for specifics, but they are pretty common.   As well as his license #, then verify with the state (online) that his license is active.  

If you do that, you're about as well protected as you can be.  

Best of Luck

I'm going through this right now. A local insurance agent is telling me i can use landlord insurance if the repairs/rehab is less then 6 months. It's very tempting since it's cheaper then other policies. Decisions decisions.

If you are doing a major rehab, it should be on a builders risk. If your agent says it is ok to do it that way, get it in writing that it is. So you can go after them when the carrier does not cover the loss because of misrepresentation. 

@Ryan Turner Every agent I spoke with says that Builders Risk will not cover liability. I am also now being told that they need a copy of the proposal from the GC which can't happen because I will need to insure the property before Istart getting official bids.

Your thoughts?

@Carl M. , @Ryan Turner is referring to insurance agents trying to fit a rehab project onto a Rental Dwelling policy in hopes your project is done before the property is inspected.   

The program you should look into is the one I refer to at the top of this post.  No need for GC info, no inspection, month to month billing, and the property can be vacant, occupied or being rehabbed. All of the correct coverages are part of this flipping program.

I'll reconnect with you offline.

Anyone that can offer you a builders risk can offer you liability coverage too, you are right to think you need it. I am not sure why you need a proposal from the GC, never had a carrier ask for that, unless you are doing a much larger project than I am thinking you are. The most you need to do is have your GC, when you pick them to name you as an Additional Insured. 

 Let me know if you need any additional help or info. I am licensed in PA.  

Why no just sharing the names of the insurance companies in the thread? Is that against BP's policy? I've many posts mentioning companies names...