Fix and flips can be a great investment, but they come with inherent risks.
From potential cost overruns to unexpected damage, there are a number of scenarios that could lead to financial loss.
That’s why securing proper insurance coverage should always be part of your fix and flip investment planning.
Why Do I Even Need To Buy Insurance?
The topic of insurance may not be at the top of a fix and flip investor’s agenda when thinking about all the money they’ll make from their fix and flip investment.
However, no serious fix and flip investor would even think about starting a fix and flip project without having proper insurance coverage in place.
This is because insurance is a vital risk management tool designed to help protect your valuable assets by transferring the cost of a potential financial loss from you to a third party, i.e., an insurance carrier.
Doesn't My Homeowners Policy Provide The Coverage I Need?
Standard homeowners policies are not designed or intended to provide adequate insurance protection for fix and flips. These types of policies are meant to cover a home in which you “reside”.
Further, there are specific exclusions in a standard homeowners policy concerning homes under construction or that have been vacant for more than a specific number of days (typically more than 60).
Theft and vandalism, for example, would be excluded under a standard homeowners policy for your fix and flip project.
So What Type Of Insurance Do I Need For My Fix & Flip?
The main insurance policies that should be considered for your fix and flip project are:
– Dwelling Policy
– Builder’s Risk Policy
– General Liability Policy
Dwelling Policy
A Dwelling policy provides protection against direct physical damage to the property while it’s being renovated. This type of policy may be more appropriate for dwellings that are not undergoing any major structural renovation as part of the “fix” phase of the fix and flip project.
Builder’s Risk Policy
A Builder’s Risk policy is similar to a Dwelling policy, in that it provides protection against direct physical damage to the property while it’s being renovated.
A Builder’s Risk policy is more appropriate for homes that are underdoing major structural renovations. In fact, this would likely be a required policy for fix and flips that includemajor structural renovations.
General Liability Policy
A General Liability policy is also necessary to ensure that you are covered in the event someone is injured on the premises while the property is being renovated.
However, this type of policy is not intended to provide coverage for the general contractors or other workers that you hire for your fix and flip project.
Should I Talk To My Insurance Agent About Coverage?
Because fix and flips are typically considered “high-risk” by most insurance agents and carriers, they tend to fall into the specialty segment of the insurance market.
While it is certainly wise to begin with your current insurance agent or broker, you should also consider an insurance agent or broker that specializes in providing insurance coverage for “high-risk” exposures, like fix and flips.
BR Risk Group™ Specialty Insurance is an independent agency and Surplus Lines broker that focuses exclusively on the unique and difficult to place risk, including fix and flip investment renovation projects.