Are you looking to take on your first fix-and-flip property? If so, then you’re probably eager to get started. Before you begin any of your renovations, however, it’s important to have the right insurance coverage for the property. This way, you can protect yourself and your investment as you embark on your fix-and-flip project.
What Type of Coverage Do You Need?
There are three main types of insurance that you’ll probably want to have when flipping a home for profit. These include:
- Dwelling insurance: This will protect you against costs related to physical damage or loss to the property itself. For example, if somebody breaks in and steals your copper plumbing in the middle of the renovation, you’ll be covered for the losses.
- Builder’s risk insurance: This type of coverage is designed to protect against damage that may occur to the property during the actual construction process. For example, if a contractor accidentally drops and breaks a new light fixture during installation, builder’s risk coverage will pay for the replacement.
- General liability insurance: A general liability policy will cover damages related to bodily injury that occurs on your property. If somebody slips and falls on the walkway and tries to seek legal compensation, this type of insurance will have you covered. This coverage may not include protection for contractors or other professionals working on your property, however, so you’ll want to read your policy paperwork carefully.
Ideally, you’ll want to shop for insurance on a fix-and-flip property before you even close on it. After all, you will take legal responsibility for the property as soon as you take ownership—so you’ll want to make sure there aren’t any gaps in protection. If you’ve already closed on the property, it’s not too late to purchase coverage.
Choosing the Right Insurance Policies
So, what should you look for in an insurance policy for a fix-and-flip property? Preferably, you’ll want to find an insurance company that can bundle dwelling, builder’s risk, and general liability coverage under one policy. Typically, bundling different types of coverage will save you the most money without sacrificing protection in the process.
When shopping for fix-and-flip insurance, always be sure to read the fine print. When given the option between actual cash value coverage or replacement cost value coverage, you’ll generally want to choose the latter. This way, if something happens during the flip where the entire home needs to be rebuilt (such as a fire or other covered loss), you’ll be paid out based on the actual cost of rebuilding the home from scratch.
Need More Help With Your Investment?
Having the right insurance coverage before you start your fix-and-flip will give you much-needed protection and peace of mind as you embark on this investment journey. Still looking for the right financing for your fix-and-flip property? Norfolk Capital has you covered with hard money loans to suit your needs. Reach out today to learn more!