We have a contract on our first home to start flipping, (exciting) from asking around we have received different answers to our question, "what insurance should we carry for flipping homes".
We have received the following, Builders Risk, Liability, Home owners and few others, should we carry one, all or a combination. There is probably no one right answer based on location, risk, lender etc. but what's the opinion of the minimum required?
My gut says Builders risk and liability, then gather certificates for anyone working on the project. Second part is for how long should you carry after the sale or are you relieved of any risk once its sold?
I'm not sure how things are in Maryland, as I operate in Texas. But the hard money people we deal with tell people to get one of two types of insurance, Vacant Dwelling and Builders Risk. Of the two, Builders Risk is more expensive and only covers you when you are doing rehab, which means you need to transfer to a different type while waiting to sell. Vacant Dwelling is generally better, but I would consult with an insurance broker to see what your best options are.
I would recommend talking to a good agent and getting his input. My partner is a builder so he has a general liability/builders risk policy and our agent advised us to get a homeowner's policy for a vacant house.
If you don't have a broker, call Barry Winstead at 410-398-6700. He is not local to you, but he is a Maryland Broker and sells a good quality product at great rates. On top of that, he is a terrific guy.
You should check with a quality insurance agent that writes policies on this type of property. Generally speaking, you should have a builders risk policy while the property is under construction. It is very possible, if you don't have the right policy, for the carrier to deny any claim. Again, I am not an agent, but over the years we have always carried a builders risk while under construction and then switched to the appropriate policy when construction was finished. Obviously, you will want to get all insurance certificates from your contractor(s)
As a Property Manager of both commercial and residential property, be sure all of your contractors have their certificates of insurance sent to you directly from their insurance carriers BEFORE THEY DO ANY WORK AT YOUR PROPERTY and make sure they list your business entity as an additional insured. Make that a standard practice for your contractors, no COI, no work. If your company is not named on the COI, it could potentially leave you exposed to risk, should something happen. You also want the insurance company to send it directly so that you know the COI is valid. There are horror stories of property owners held liable after the contractor screwed up because they were given a fake COI...
@Laticia Braxton Laticia EXCELLENT advice
I get pretty frustrated with insurance costs.. as a new home builder we have builders risk ( theft fire etc) G L ( and one hurt and product liability for 10 years from Completion) then we have GC that I hire have GL... then the subs all additionally insure the GC... and we buy a 2 /10 warranty as REQUIRED by our GL carrier.. and we are REQUIRED to have our GC have 5 million ... For me as Owner developer I am paying roughly 3500 a house just in the off chance someone will sue me in the next 10 years.. my GL is only one million and we have it basically to just pay for Lawyers when and if that day comes... first line is sub's insurance then GC insurance then our GL... I hate it.
@Laticia Braxton, Laticia you gave great advice! Robert I would highly suggest you talk to an experienced insurance agent. Some of the insurance companies consider this commercial insurance and do not offer it, or so that it what they told me. Good luck!
You are not that far from me, would love to connect!
Thanks for the advice and suggestions, insurance is one of those things everyone hates but you have to have it and you feel its a waste of money until something happens and then its a relief. Luckily my back ground is construction and have been negotiating contracts, SOW and COI for the past 25 years and have learned some things the hard way.
I have a few calls into agents and sounds like there are a few policies needed depending on the stage your in. Thanks again for your help
please feel free to reach out to me if there is anything i can do to help