What type of insurance do I need?

[Marsha Rost]

If I am doing a BRRR, buying with cash, what kind of insurance should I purchase for the renovation phase, before I get it rented out? I heard someone mention a builder's risk insurance? They old me that it is a min 6 months term and I have to pay all the premium upfront. Can I just buy a regular homeowner policy?

[John Mocker]

Marsha,

There are a couple of options on how to insure the renovation.  The most common is a Renovation Builders Risk policy.  It insures the existing structure and the renovations. The total limit is usually the existing value (minus the value of the land) + the cost of renovations.  Remember, the Builders Risk policies generall do not include Liability coverage so you will have to get a second policy for that). 

There are some carriers that will write a Vacant Dwelling policy and include the renovations.  I  would get it in writing from the agent or company that the policy allows for renovations and the value of the renovations will be included if there is a claim.