Insurance for House Flip Project: When Do You Need It?

If you don’t want to deal with the inconvenience of owning a house and renting it out, buying a fixer-upper and reselling it for a profit is the next best thing. While the process appears to be straightforward, one critical aspect should never be overlooked: the requirement for home insurance

You may believe you don’t need insurance because no one lives in your investment property. That, however, is not the case. Believe it or not,  several things that may go wrong during renovation projects that leave the house empty for months at a time, including fires, vandalism, pipe fixture, theft, and more.

Traditional insurance companies and homeowners policies consider house flipping to be a “high risk” activity and are not designed to protect unoccupied or rehabbed houses. Flipping houses necessitates specialized insurance coverage not available through a standard homeowners policy. The insurance policies listed below will protect your property and personal belongings while also giving you peace of mind.

Dwelling Policy

A dwelling policy is meant for abandoned properties and covers the property from direct physical damage. This is a common type of insurance for people who flip real estate. It’s not always easy to spot potential problems during even the most basic of upgrades.

Although a dwelling policy is an excellent way to stay protected, it’s important to realize that it won’t cover any materials or equipment used during the restoration.

Builder’s Insurance Policy

A builder’s risk coverage is also meant to protect vacant property and is required if your renovation involves structural alterations. This coverage, once again, protects the property from direct physical harm while it is being built.

A builder’s risk policy, unlike dwelling policies, covers renovation supplies and is often bought as a rider.

General Liability Policy

As you might expect, dwelling policies and builder’s risk policies are concerned with damage to the structure and possibly the materials. However, what about physical harm? It is not uncommon for someone to get hurt while renovating. Your general liability coverage will cover you if you are injured, but it will not cover your contractors or anybody else who is working on the property.

It does, however, protect you if you are sued as a result of an injury on the property. The insurance firm will cover any medical or legal costs incurred due to a slip and fall.

Bottom Line

The basic types of insurance that you need to buy while flipping houses are dwelling and builder’s risk. If you’re going to be doing any structural alterations, such as replacing a roof or adding on an extension, then you will need general liability coverage too. The cost of insurance varies depending on the value of your home. Still, it is important to remember that you don’t have to pay for coverage if you are not going to be making any structural alterations.

If you have any questions about any of the insurance mentioned above, feel free to reach out to our team at ISU Wissink Insurance Agency. We will help you find the right coverage for your unique insurance needs.