Flip Insurance Coverage

7 Replies

I'm closing on my first property (YAY!) in a couple of weeks, and working on setting up insurance. The insurance provider that I have my personal home and auto insurance under (State Farm) quoted me for a Rental Dwelling Policy. When I inquired about a Builder's Risk Policy, she responded that, "This RDP quote is for Builder’s Risk. It would have to be written this way as it is not intended to be owner occupied or seasonal for your use. This is the only way we can write it as State Farm doesn’t insure homes that are being flipped otherwise."

So...the policy covers the below.

Does this look OK? Normal? I have another quote coming in - but curious how this compares to what most people are seeing. Thanks!

I would be concerned with a few things here.

-Is it at basic, broad, or special form. (Forgive me if it’s there... small text)
-What is the vacancy provision. E.g. what coverages if any do you loose if the property is vacant more than so many days.
-Is there a co-insurance clause? (There likely is)
-It looks more like a modified homeowners policy than an actual builders risk...

Feel free to reach offline with any situationally specific questions. I’m always happy to help.

@Laura Bray I was a State Farm agent, so I understand their product well.

The agent is correct in that their product is not meant for flipping.  With this product, you are trying to fit a square peg into a round hole hoping everything goes well.

There are other insurance products in the marketplace meant for flipping.  I'll PM you some additional info.

@Anthony Lee Thanks for the suggested questions - these were her answers:

Is the type of policy basic, broad or special form? SPECIAL FORM
What is the vacancy provision? THERE IS NONE AS THE PROPERTY IS UNDER CONSTRUCTION
Is there a co-insurance clause? NO

Thoughts??

@Laura Bray

I would advise that you look for something on the proposal that states special form. 

Generally, a property under renovations is not considered a vacant property but what then happens when the property has no renovations and is actually sitting there vacant and on the market listed for sale? 

Most policies have co-insurance, I would look to have it say on the proposal that there was, in fact, no co-insurance. 

@ Laura Bray although I am only a flood insurance expert Nerd I would agree with @ Jason Bold and @ Anthony Lee. 

State Farm primary wheelhouse is Home and Auto as you move into investing your "local agent" might not be the best solution for your new unique changing insurance needs. 

These type of policies usually are better shopped to independent agents that sometimes can truly understand your risk and shop to multiple different companies (not all policies are created the same). 

They should have products (insurance policies) that better fit the risk you have now as a builder/investor/real property owner/landlord. 

 It would be a good idea to look at a different company for this type of risk I would ask the agent/agency what is the majority of their expertise as in what is most of their book, auto for homeowners or commercial property?

I would suggest you start with one of the two kind gents that responded to your inquiry.

Your flood Nerd 

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