The TV shows make it look so easy. You buy an ugly house, fix it up in a week or two and then sell it for a whopping $100,000 profit. But as anyone who has ever tried it knows, house flipping is a lot harder than it looks. Before you jump into a house flipping project, you should consider these insurance coverage issues:
- Take into account the cost of insurance when purchasing a home. If the house does not sell within a few months, insurance is a continuing expense that needs to be included in your budget.
- Make sure you do your research when selecting an insurance company and policy. At Brown Insurance Group, we will do the legwork for you. As an independent agent, we will find the right insurance company and policy to meet your specific needs. Some insurance policies provide additional coverages you may need. Consider choosing one that provides limited coverage for water damage and fungi, wet or dry rot or bacteria. These issues often go unnoticed until after a remodeling project begins.
- At Brown Insurance Group, our advisors will review insurance to value – the need to insure the home for its reconstruction cost. Just because you purchased a home for a certain price does not mean that the home can be replaced for that amount. There can be a huge discrepancy between market and replacement cost values. Builders’ risk insurance for the remodeling cost of the project is also a coverage our insurance advisors will review with you.
- Consider the cost of building materials going into the refurbished home. An installation floater – coverage for movable property – can be simply endorsed to your policy to insure construction materials in transit and at the jobsite.
- Allow plenty of time to purchase insurance rather than waiting until the last minute. Some companies may consider this a vacant home and deny or limit coverage for vandalism, theft or other perils.
- Before you allow contractors to start work on your investment, first confirm that they are insured. The safest bet is to request a copy of each contractor’s general liability policy declarations page. Make sure that the policy has at least a $1 million per occurrence and general aggregate limit.
Whether house flipping is for business or pleasure, keep these insurance needs in mind. You will better position yourself to reap in the benefits and rewards of house flipping, protecting your investment and personal assets at the same time. For more information, contact us at 219-972-6060.