What Insurance Do You Need for Flipping Houses?​

Flipping houses requires special insurance coverage that your traditional homeowner's insurance policy will not cover.

Your traditional insurance provider that you use for your personal residence or auto, will likely not provide the type of policy you need for your house flip.  

House flippers typically buy distressed properties that need significant renovations, that will sit vacant for months while the rehab is being completed. Traditional insurance providers and homeowner's policies view house flipping as 'high risk' and are not designed to protect vacant properties or properties that are needing rehab.

For this reason, when flipping houses you will need to consider 3 Special Types of Insurances:

A Dwelling policy for a Vacant Building Under Renovation is for direct, physical damage to the property. This may affect you as a flipper when doing a light, cosmetic renovation, when the property is on the market for sale, or when looking for a tenant.

For insurers, vacant properties and those being renovated are considered a higher risk, because they are more prone to arson, theft of copper plumbing, vandals and water damage.

Be sure your agent knows if a cosmetic renovation is active on a property, and when it is complete, and that the appropriate values are assigned to the building value and renovation value.

​​A Builder's Risk insurance policy may be considered when doing a structural renovation and covers direct, physical damage to a property during the construction process. Coverage may extend to materials, fixtures and equipment used in the renovation of the property, if owned by the insured.  
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A Dwelling Policy may not cover the renovation portion or materials so it's important to consider adding a 'Builder's Risk rider' to your policy.

A General Liability policy may provide coverage for bodily injury that occurs on the premises such as a slip and fall or wrongful death. This coverage does not extend to your general contractor or workers you hire to be on site.

When in doubt, tell your Insurance Provider your business intentions so they can craft a policy that will properly protect you, your property & your assets.

All insurance coverage isn't created equal, so it's best to thoughtfully consider how much coverage your need for your house to make sure you aren't under-insured (or over-insured).

You generally have two different options for insurance coverage:

Basic Form provides coverage for the causes of loss listed in the policy, all other causes of loss are excluded.

The perils you’ll want to be aware of that are not included in Basic Form coverage are Theft, Weight of Ice, Sleet or Snow, and Water Damage (such as that caused by burst pipes).

While Basic Form coverage can save you 25-30%, consider these exclusions.

This coverage form provides coverage for all causes of loss except those specifically listed as exclusions in the policy. The burden of proof is on the insurance carrier to prove that a loss was caused by a specified exclusion, or else coverage is afforded.

Exclusions you should be aware of in this type of policy include Sewer & Drain Backup, Earthquake & Sinkhole, Flood and Intentional Damage. Some, but not all of these may be bought back through additional endorsements.

You also have the option of two types of settlement methods that affect your insurance costs and the amount you can recover the event of a loss.

Actual cash value coverage settles claims based upon the property's value in it's current condition. Actual Cash Value is calculated by taking today's replacement value and deducting depreciation to account for the property's age and wear-and-tear.

Actual cash value leaves you in a tough position because you may not be able to recoup all of your money that you would need to completely re-build the property.

Replacement cost value coverage settles claims based upon the amount of money it would take to replace your damaged or destroyed home with the exact same or a similar home in today's market.

It's important to note that the replacement cost value only includes the value of the home, but not the value of the land.

In general, at the very least you want to obtain enough insurance coverage to cover the amount you paid for the home (less the lot value) and the amount invested in the property for renovations.

However, in the event of a total loss where you lose the entire structure you will either have to completely re-build the property at full replacement cost or sell off the lot to another investor for them to re-build.

In that scenario, you will want to have enough coverage to pay for the replacement of the property or enough coverage to prevent a loss if you have to liquidate the lot.

According to Obie Insurance, house flipping insurance can cost between 15% to 25% more than a standard homeowner's insurance policy.

Costs vary widely based on your geographic area, you deductible, replacement values and level/type of coverage.

Depending on the State and the size of the property, house flipping insurance typically ranges between $1,000 to $4,000 per year.

Don't wait until the last second to start contacting insurance providers!  As soon as you get the property under contract you should reach out to a few insurance providers to get quotes on insurance coverage and select the best insurance provider for your business.

Remember, as soon as you take possession, the property is your financial responsibility so you will want to make sure you have property insurance in the unfortunate event disaster strikes on day one of ownership!

Yes, there are insurance providers that provide insurance coverage specifically for house flippers and real estate investors. These companies specialize in providing flexible insurance coverage for vacant properties, renovation projects as well as occupied rentals.

For house flippers that are flipping multiple houses a year, these insurance providers are able to include all of their vacant, rehab properties or occupied rentals on one-schedule and one monthly payment.
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Here are a few recommended house flipping insurance providers: