Insurance during renovation

11 Replies

Hello BP Community,

I am about to close on a single family property that will need a bit of work before it is ready to be rented: foundation, roof, some electrical, cosmetics including drywall, painting, floors etc. It is my first rehab, and I was caught by a surprise that I can’t get just a standard rental property insurance policy, as rehab is considered too big of a risk. I believe I need to get what a Builder’s Risk insurance, but it seems it only insures the materials not the dwelling.

I hope to get some feedback and what is the best thing to do to ensure proper insurance is in place during the rehab phase that protects the home in case of an unfortunate event. I estimate time to rehab between 2 and 3 months, and property is just outside of Houston, TX.

Thanks in advance.

Kuba, The Builders Risk policy covers the Building in the course of construction and generally includes materials not yet incorporated in the building (on site, in transit, or at temp site) with separate limits. The type of builders risk you want is a Renovation Builder Risk. That type has a limit for the existing structure and then a limit for what is being added or it covers both on one limit. Policies differ on the perils covered (Special form vs Named perils) and on the valuation after loss (Replacement Cost vs Actual Cash Value). Be sure to have your agent explain the differences. If you are getting multiple quotes know that the best price may not be the best value. Another thing to watch out for is the Minimum premium. Some policies are fully earned, meaning that if you cancel early you do not get anything back. Others may have a 25% minimum (approx. 3 mos coverage) that is better and no minimum is the best. For my clients I try to get an annual policy that will refund if it is cancelled early. Even if they think they will be done in 3 mos or 6 mos. I still prefer the full year term. That way, if the project runs longer than anticipated, we don't have to go through the renewal process. Lastly, remember that you need Liability coverage as well. Some companies can incorporate it with the Renovation Builders Risk and others you will need to purchase that separately. Good luck with the project and feel free to PM me if you have any questions on the info above.

We don't insure properties that we acquire until we get a rental contract on them. I did once and didn't feel like there was a strong enough cost/benefit vs the risk.

We're finishing up a property this week that we've been working on 2 years and have owned for 5 years and it's never been insured...(at least while we've owned it)

We're getting ready to close on a property in about a week and that will be the most expensive property we've purchased to date so I may see if we can get a policy on it after purchase. It needs about 6 weeks of work on it. (paint in and out, trim work, flooring and some outdoor landscaping).

Originally posted by @Kuba Bednarz :

@Wale Lawal If you don’t mind sending me your agent’s contact, I will gladly give them a call. Thank you for all your help so far!

Sent.

 

thank you Wale

Originally posted by @Wale Lawal :
Originally posted by @Kuba Bednarz:

@Wale Lawal If you don’t mind sending me your agent’s contact, I will gladly give them a call. Thank you for all your help so far!

Sent.

 

 

John, you don’t take any insurance at all? Not even liability? Your risk tolerance is much greater than mine.

Originally posted by @John Teachout :

We don't insure properties that we acquire until we get a rental contract on them. I did once and didn't feel like there was a strong enough cost/benefit vs the risk.

We're finishing up a property this week that we've been working on 2 years and have owned for 5 years and it's never been insured...(at least while we've owned it)

We're getting ready to close on a property in about a week and that will be the most expensive property we've purchased to date so I may see if we can get a policy on it after purchase. It needs about 6 weeks of work on it. (paint in and out, trim work, flooring and some outdoor landscaping).

 

Originally posted by @Kuba Bednarz :
John, you don’t take any insurance at all? Not even liability? Your risk tolerance is much greater than mine.

Originally posted by @John Teachout:

We don't insure properties that we acquire until we get a rental contract on them. I did once and didn't feel like there was a strong enough cost/benefit vs the risk.

We're finishing up a property this week that we've been working on 2 years and have owned for 5 years and it's never been insured...(at least while we've owned it)

We're getting ready to close on a property in about a week and that will be the most expensive property we've purchased to date so I may see if we can get a policy on it after purchase. It needs about 6 weeks of work on it. (paint in and out, trim work, flooring and some outdoor landscaping).

We don't have any significant liability exposure during the rehab as my wife and I are the only people that work on the property. And we do insure most of our occupied properties. (we have a couple recent acquisitions that we haven't sorted through yet)

Our risk tolerance is high. We don't have collision or comprehensive on any of our vehicles and have very high deductibles on all policies. As far as losses, I've had one insurance claim of any sort in my entire life. That was covered under uninsured motorist. So for the 40+ years I've been paying insurance on various things, I've received very little benefit.