Builder's risk insurance for BRRRR

[Jessica Stern]

Hello, I am currently submitting all my paperwork for a new hard money loan through my LLC (for a single family BRRRR in Philadelphia). I am adding a half bath to the first floor, so my lender has mandated that I get builder's risk insurance. I'm fine doing so, but the rehab is expected to be completed in 6 weeks or less, so my concern is getting locked into a monthly builder's risk insurance payment longer than I have to be.

Do any of you have experience with this, and any watchouts I should look out for? For example, would I need to provide a certificate of insurance from my contractor, listing my LLC as an additional insured? Also a very basic explanation of what builder's risk insurance is, would be very helpful (first time buyer here)! Thank you in advance.

[Greg Kasmer]

Jessica - Usually a builder's risk policy can be converted to a occupied policy with the same company. Or, you can cancel the builder's risk and get refunded the "unused portion" of the policy. Also, they would typically want a builder's risk policy until the property is occupied, so you may have a period in time when the renovation is complete, but no one is living in the house yet, so you'll likely need to stay on your policy during that time. I don't think the insurance company will need information about your contractor (i.e. his insurance), but may ask about the scope or the project to understand how to set up an appropriate policy. Good Luck!