Real estate investments can be quite lucrative, but they come with a whole slew of risks that require proper planning – especially when to purchase insurance for a fix & flip investment.
One important part of the equation is purchasing insurance for the property you’re flipping before you begin work on it. But when is the best time to buy protection for your fix and flip project?
In this article post we’ll review why timing is important for getting the right insurance coverage in place for your fix and flip real estate investment.
Why Do I Need Insurance?
When you’re flipping a real estate investment, insurance is an essential part of the process. This is true whether you’ve secured funding for your project or you’re an all-cash investor.
If you suffer a loss due a fire, for example, during the renovation, then you won’t just be out the initial money you spent on the property itself. You’ll also be out all of the additional funds you’ve sunk into the project up to that point.
That’s why it’s extremely important that your fix and flip investment is protected against potential damages or losses during the process of renovation.
When Should I Buy Insurance?
So the question is, when is the right time to buy insurance for a fix and flip investment?
Ideally, you want to purchase fix and flip insurance as soon as you close on the contract to buy the fix and flip property.
Again, this is important whether you secured funding for your project through a hard money lender, for example, or whether you paid cash for your property.
Purchasing insurance for your fix and flip project as soon as you close on the property will ensure that your investment is protected from the start.
What Insurance Coverage Should I Buy?
Again, it’s important that you purchase insurance coverage for your fix and flip project as soon as you buy the property.
This will help protect your newly purchased asset before you begin any renovations.
With respect to how much insurance coverage to purchase, that will depend on the type of property, the size of the property, it’s after repair value (“ARV”), and potentially other factors.
As far as which types of insurance to purchase for your fix and flip project, always be sure to secure both property and liability coverage.
Property Coverage
Property coverage helps protect the dwelling itself from direct physical damage due to fire, wind, and other natural disasters
Liability Coverage
Liability coverage is designed to help protect you and your fix and flip business from any potential legal issues that may result from someone getting hurt on your property during the renovation process.
Conclusion
When fix and flipping a real estate investment, purchasing insurance is an essential part of protecting your fix and flip project from potential damage or losses. Make sure you purchase fix and flip insurance as soon as you buy the property.
And if you don’t already work with an insurance professional as part of your fix and flip real estate investment team, then you should. Don’t try to DIY your insurance coverage.
You wouldn’t do electrical work on your project yourself, for example, if you didn’t know enough about electrical. You’d hire a professional electrician as part of your fix and flip team.
This is why it’s important to work closely with insurance professionals, like BR Risk Group™ Specialty Insurance, that specialize in providing insurance coverage solutions for fix and flip real estate investments.