I'm curious to know what all risks are involved in the process of buying, fixing and selling a house. The risks I can think of are theft, vandalism, damage during construction, injury to a worker. What other risks are involved? I have read that a builders risk policy is the way to go. Does this insurance cover all of the above mentioned risks?
My biggest concern is injury to one of my contractor's workers. Most residential contractors here in Dallas that I've had experience with do not carry workers compensation. Is this a risk to me or to the contractor?
Also, my wife and I will likely be occupying the homes of the first few flips. Would this effect what type of insurance is needed?
@Brandon G. boy You asked a good one! Ok. The physical damage to the property such as the structure and anything in it to be used it rehab will be covered by Builders Risk policy, a definite Need in what you are doing. Zurich allows you to occupy while rehabbing. iM me and I can give you a lead for getting this. Now to the injuries that can happen to workers on site that is a big one, You can get a liability policy to cover this separate as it is not a part of physical damage. I have a lead there as I'm sure that many others do also. Now, if you do NOT purchase supplies for the sub contractors you are not considered a GC and therefore not required to or responsible for injuries. Now, anyone injured on your property can sue you so the aforementioned liability coverage is recommended. Hope this helps you. Tom
@Tom Keith Thanks for your helpful reply. The liability insurance you mentioned.. is that like general liability insurance that most companies carry? Or is this insurance that is property specific?
What are your thoughts on umbrella policies?
@Brandon G. I am in commercial insurance and see these policies daily. I am in NY and our laws are different but here's what I think. Builders risk is going to cover your property. The existing structure and the materials. I write the liability portion two ways an OCP (owners and contractors protective) which covers claims relating to construction. Some people in NY also want a vacant policy to cover the premise liability (claims not arising out of construction) ie a slip and fall. You can get both of these policies short term if it's a quick rehab 3 month and 6 month available. The most important thing to do is make sure the GC you hire is going to add you as an additional insured onto his policy. You are right about you or your GC hiring uninsured contractors, they throw the book at you up here and claims get HUGE. Hope this helps
@Brandon G. You can get a general liability to cover 1-4 properties from various companies in Texas. The Umbrella policy would be considered commercial and it only pays if limits of liability are exhausted. If you don't have the assets to protect in that range no need for it. I just retired from owning insurance agency for 28 years in Texas. You should talk to whomever you use for other insurance needs and see what they say and have to offer.
Coverage for theft and vandalism is often very, very limited in these policies. Be sure you're getting what you expect.
Watch out for "fully paid" insurance. Some of these builder's risk and vacant house policies are fully paid. That means even if you cancel a week into a three month policy you won't get a refund.
If you're living in a habitable house and doing fixup a homeowners policy may be adequate. Discuss it with your agent.
Don't try to do anything tricky. If you actually do have a claim the insurance company is going to do everything they can to deny your claim.
Thank you all for the helpful information. So as I understand, all the insurance in the rehab business is property specific. Is there a place for any other types of insurance that are more for "overhead"? For example errors and omissions comes to mind. Or is 100% of your insurance policies got for a specific property and cancelled once the property is sold?
I tried to get commercial general liability for business but was denied because I was not fix and flip only. I am still looking. Remember Brandon, insurance is state specific, what is available in some states isn't available in Texas. Our state insurance board is about 10-15 years behind everyone else.
Thanks again for the info!
I just signed up with www.reiguard.com and they were very professional and provided exactly what I needed for my flip at a reasonable price. Thanks REI Guard.
You will need Builders Risk and General Liability. Yes, if you are acting as a GC and the subs do not carry insurance, this is a BIG risk to you.
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