Insurance 101 for House Flippers

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.

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What are the Benefits of Bundling Home and Auto Insurance?

We’ve all seen the ads. Whether in a museum of inexplicable accidents or a fitness class where alter egos debate coverage, the messaging often includes: Bundle your home and auto insurance. 

But should you?

It often leads to greater savings and better service. Let’s explore why.

Most Carriers Offer Multiple Products

Bundling home and auto policies provides a good deal for most. If you can get a single stop for your insurance needs — and save money — who wouldn’t? 

Aside from financial savings through companion discounts by purchasing multiple policies, a single carrier can save you time.

Bundling Policies Should Save Money

For bundling to make sense, combining your home and auto insurance under a single carrier should save you some money.

Often called a multi-policy or companion discount, bundling home and auto insurance can save you as much as 20 percent to 30 percent on premiums than if you purchased the policies from separate companies.

Now, that amount can vary by state and carrier. 

A byproduct of bundling can result in financial benefits down the line, as well. In certain circumstances, such as a car and house each incurring damage in the same incident, you could save you money. When you bundle, you can save by filing a single claim and paying one deductible. If you have multiple carriers in that same scenario, you would need to file claims with each carrier and pay multiple deductibles.

Hopefully you never encounter an incident where both your home and auto are damaged. If you do, saving some money could make you feel a bit better about the situation.

Bundling Should Save Time

In this day and age, where our attention is pulled in many different directions, bundling coverage could look attractive by the time savings alone.

When you bundle coverage, it should reduce administration such as paperwork and websites to visit. Overall, the need to communicate with multiple providers goes away. And when changes need to be made, having that relationship with a single provider can help simplify the process of needing to add coverage or address issues.

Loyalty Can Work Both Ways

We mentioned issues prior. Not only could you develop a personal relationship with a carrier, but that carrier can look at you differently if you have multiple products with them.

Live in an area with severe weather? When carriers get skittish about providing home coverage, it’s easier to obtain or keep your coverage if you have bundled products. They know if they don’t keep you as a client in one product, you’re likely to switch to another carrier for the other service.

Speaking of loyalty, carriers can also offer more expansive bundles. These combinations of policies work best for people who are looking to not only bundle home and auto policies, but also perhaps, as an example, a recreation vehicle or two as well as another property. 

These bundles can provide the same advantages of time and cost savings. But before committing to a single carrier for most of your insurance needs, consider and evaluate some key criteria about the company.

Sometimes Bundling Isn’t The Answer

Even though bundling policies provides benefits for many people, in some instances it doesn’t make sense. First, you want to make sure you’re getting the same coverage for your money. Don’t skimp on coverage because you could end up paying more in event of a loss down the road. 

Also, certain special items, such as premium vehicles, may not work well in a bundle.

9 Reasons Homeowners Insurance Claims Are Denied

Year after year, you send that premium payment for your homeowners policy. When accidents happen, you expect the insurance company to cut a check for the full extent of the damage to your home, no matter the amount or what caused it.

It doesn’t always work that way. What you think you’re entitled to under your policy and what the carrier believes they owe you are often two very different dollar figures.

Don’t take it personally. Remember, carriers have to price your coverage based on statistics, probability and risk. They can only pay to the extent a claim is based in cold, hard facts, policy language and evidence. 

If your claim falls under one or more of the criteria below, there’s a good chance it will be reduced or denied altogether. But alas, insurance companies don’t take claims personally, either. We’ll follow with ways to ensure your property is covered properly and recovered adequately.

Why Are Homeowners Insurance Claims Denied?

  • Not Enough Information

  • As the homeowner, it’s your responsibility to file and prove your claim. Insufficient documentation of damage to your property won’t help your case. Neither will a lack of a complete inventory of valuables on or in your property prior to the loss.

  • Taking Too Long to File

  • If you take too long to file the claim, your chances of a satisfactory payment go way down. Policies typically contain time-sensitive requirements for filing the claim and documenting damage.

  • Late Payments

  • If your premium payments are late and result in any lapses in coverage, you run the risk of property damage occurring when your policy is exempt due to non-payment.

  • Threat of Fraud

  • Unfortunately, insurance fraud is a predictable reality. Therefore, your carrier will send their own claims adjuster to investigate almost every claim. Anything that raises questions—whether in the claim or in your initial application—could be game over. If your losses are serious, particularly if the policy covers your business, consider hiring an independent adjuster. 

  • Claim Type Not Included in Coverage

  • No homeowners policy covers the entire house and everything in it, nor does it cover against every possible source of damage or loss. Common policy “exclusions” include earthquakes, floods and water/sewage backup, or other regional risks. 

  • Loss is Close to Your Deductible

  • A typical homeowners policy deductible—the amount you pay before the claim kicks in—is $1,000. If the estimated loss is close enough to your deductible level, carriers will deny the claim, though in that scenario you wouldn’t want to file one. 

  • Perilous Claims May Not Be Covered

  • In insurance speak, “perils” refer to things like fire, theft, lightning and hail. “Occurrences” speak to the actual losses, such as a destroyed kitchen, or soaked carpet and furniture. Lower-end policies only cover a certain number of perils, others cover all of them. 

  • Somebody (or Something Else’s) Fault

  • If it was your contractor’s negligence that collapsed the foundation or your neighbor’s tree that totaled your SUV, your insurance company isn’t responsible—and your policy doesn’t apply. 

  • Excessive Wear

  • Imagine an insurance carrier paying to fix a rusted-out car bumper after an accident. Doesn’t happen. Same goes for an old roof full of worn shingles and leaks. If a claims adjuster finds evidence of poor maintenance or excessive wear-and-tear of your property, chances are the claim will be denied. 

Avoid the Dreaded Denial

  • Document all damage and file a detailed itemized claim to your insurance
  • Notify your carrier as soon as possible (even if in the middle of the night) of any loss and know the time limits for filing a claim
  • Don’t miss a premium payment
  • Know what your policy covers and excludes; obtain adequate coverage for more “perils” if available
  • Do everything possible to maintain the property before an event, and to mitigate the damage until an adjuster assesses the damage