Flipping houses hit an 11-year high in 2017. It’s no secret why. Television shows such as “Flip or Flop” and “Rehab Addict” flaunt how flipping houses can provide a lucrative career or side hustle. But it’s not always an easy one. Many things can go south during a flip, including stolen materials or structural damage while the house sits empty. Mishaps that eat into potential profit.
Most people go into a flip thinking about asking price, cost of renovations and earning potential. It’s important to add insurance coverage to the early list of considerations.
Below we answer four common insurance questions from flipping newbies.
What Type of Insurance Policy do I Need for my Flip?
New house flippers may think general homeowner’s insurance will cover their needs. The type of insurance policy needed for a flip depends on the stage of the project. Here are four policies to consider. A Bond Insurance Group agent can help determine the best policy for each stage of your flip.
Builder’s Risk Policy – A builder’s risk policy covers the property during construction. Work with your insurance agent to ensure all of the needed items, such as an installation floater for materials, are included in the policy. Once you complete construction, secure another type of insurance.
Dwelling Policy – A dwelling policy covers the home’s structure, not the personal belongings inside. This makes it an ideal policy for flippers, whose renovations do not contain personal belongings.
Liability Insurance – Liability coverage protects the owner and investors in the event an injury occurs at their property.
Vacant Home Insurance – If the property will sit empty for 30-60 days purchase a vacant home insurance policy. Vacant homes pose a higher risk because no one is present to catch big problems, such as flooding. And vacant homes are also more susceptible to theft and vandalism. A standard homeowner’s insurance policy does not include coverage during times of vacancy. If there are delays in the rehab schedule or the house sits on the market empty for months instead of weeks, vacant home insurance provides protection.
How Much Insurance Coverage Do I Need?
In general, obtain enough insurance to cover the cost of the home after renovation. This accounts for both the replacement of the home at the cost you paid, as well as renovation costs.
When Should I Get Insurance for my Flip?
Don’t wait to contact an insurance agent. Many policies must be in place before a certain percentage of the renovation is complete. Talk to an insurance agentearly in the process, before making an offer, to determine policy options.
Can I Purchase One Policy for Multiple Houses?
A policy covering multiple pieces of real estate can be especially appealing for investors looking to flip more than one home. This type of coverage does exist but may be harder to come by. An insurance agent can help research and find the right fit.
Ensuring proper insurance covered at each stage of the project is key to protecting your flip. Guard your investment. Contact a Bond Insurance Group agent before jumping into a flip to learn more.