Urgent Advice: Condo Fix-and-Flip Insurance - General vs. Personal Liability

[Kwok Wong]

Hey everyone,

I'm working on a fix-and-flip condo project, and I've hit a confusing issue with the insurance requirements from my lender. I'm hoping someone with experience in this area can offer some guidance.

Here's the situation:

My Lender's Requirement: My lender explicitly states they need $500,000 in General Liability coverage for this project.

My New Insurance Quote: I've just received two new insurance quotes that provides either $300,000 or $500,000 in Personal Liability coverage.

My Broker's View: My insurance broker insists that because it's a residential condo unit (even though it's purchased under an LLC), $500,000 Personal Liability should be enough, and General Liability isn't really necessary for this type of residential property.

Lender's Previous Stance: However, my lender has already clarified to me that "general liability is different from personal liability" and that it "cannot be combined with the general liability on the Master condo policy". They seem to view the fix-and-flip under an LLC as a commercial activity requiring specific General Liability coverage.

I'm feeling caught between my broker's advice and my lender's very clear and consistent requirement. My lender seems pretty firm on needing General Liability for this project.

Has anyone encountered this specific issue with hard money lenders and condo flips? What's the typical best practice here? Should I push back on my broker to find a true General Liability policy, or is there a common way to satisfy the lender's requirement in this condo/LLC scenario that I'm missing?

Any insights or advice would be hugely appreciated! I'm trying to ensure I meet all closing requirements smoothly.

Thanks in advance!

[Chris Seveney]

Quote from @Kwok Wong:

Quote from @Chris Seveney:

Quote from @Kwok Wong:

Hey everyone,

I'm working on a fix-and-flip condo project, and I've hit a confusing issue with the insurance requirements from my lender. I'm hoping someone with experience in this area can offer some guidance.

Here's the situation:

My Lender's Requirement: My lender explicitly states they need $500,000 in General Liability coverage for this project.

My New Insurance Quote: I've just received two new insurance quotes that provides either $300,000 or $500,000 in Personal Liability coverage.

My Broker's View: My insurance broker insists that because it's a residential condo unit (even though it's purchased under an LLC), $500,000 Personal Liability should be enough, and General Liability isn't really necessary for this type of residential property.

Lender's Previous Stance: However, my lender has already clarified to me that "general liability is different from personal liability" and that it "cannot be combined with the general liability on the Master condo policy". They seem to view the fix-and-flip under an LLC as a commercial activity requiring specific General Liability coverage.

I'm feeling caught between my broker's advice and my lender's very clear and consistent requirement. My lender seems pretty firm on needing General Liability for this project.

Has anyone encountered this specific issue with hard money lenders and condo flips? What's the typical best practice here? Should I push back on my broker to find a true General Liability policy, or is there a common way to satisfy the lender's requirement in this condo/LLC scenario that I'm missing?

Any insights or advice would be hugely appreciated! I'm trying to ensure I meet all closing requirements smoothly.

Thanks in advance!

 If you are fixing and flipping it your general contractor should have insurance. if you are not using a general contractor and hiring trades yourself then it is a different type of policy that would cover general liability. they probably want you to get a builders risk policy with general liability. 

I have been talking three insurance brokers, they all insists that General Liability is not needed, and none of them seem willing or able to quote a General Liability policy, telling me it's "not needed" for a residential property.  

Did you tell them you were renovating it without a general contractor and you are acting as the general contractor? You are confusing homeowners insurance with business insurance. Ask them what happens of your contractor drops a 2x4 out the window and it hits someone in the head and kills them?