Homeowner's Insurance For House Flippers: How To Make Sure You're Always Covered
Flipping houses can be fast and even easy money if you know what you're doing, but one aspect of the business that often catches these renovating entrepreneurs off guard is insurance. It's a home, so you need coverage, but it's not really yours to live in, so what's a confused flipper to do?
Here's the lowdown on homeowner's insurance for the temporary homeowner:
Why Homeowner's Insurance Is Important For House Flippers
As a flipper, you may spend a considerable amount of time fixing up homes, meaning they're vacant for a while before you sell them. Insurance companies don't like it when a building is totally vacant, because it's more susceptible to vandals, such as graffiti artists or even squatters, who might temporarily occupy the residence, leaving a trail of destruction and debris in their wakes. There's a special type of home insurance which can be very helpful to owners of buildings in these circumstances.
While you may not want to pay for a complete policy on the property, since you're ownership will be short-lived, you still need some form of protection in the meantime.
The Most Appropriate Insurance For Flippers
There are many other people in the same boat as you concerning vacant property; contractors, for example, must often leave their dwellings vulnerable during the construction period, long before a structure can even be occupied. For them, as well as for you, insurance companies offer a policy called builder's risk. Beyond the pesky graffiti bandits and occasional squatter, this type of policy will protect you in the event of fire and weather damage, as well as any loss that may occur to the property from motor vehicle and aviation accidents.
Builder's risk is fairly specific, in that it pertains to only the damage a home might sustain during accidents, storms, and fire; it doesn't cover you in other areas you may still need coverage.
Other Insurance You May Need
Particularly if you hire workers during renovations to the homes you intend to flip, builder's risk does not apply. Instead, you're going to have to obtain standard liability coverage for those circumstances. Additionally, you may be eligible for extensions to your homeowner's insurance, which would cover the new investments you make for house-flipping, much the same way your personal home would be covered during renovations to it.
Since different projects and properties come with different qualifications for specific types of insurance, it's important to ask any insurance agent you're considering a lot of questions. Also, it might be in your best interest to recommend your chosen insurance agent to the people who purchase your flipped homes; if you send new customers their way and they have any kind of referral bonus plan, there will definitely be some type of reward in store for you.
Protecting Your Property When It's Vacant
You want to protect your homes while they're in the flipping stage, above and beyond the fact that your insurance could go up if you don't. Any nefarious visitor to your property is likely to inflict costly damage, setting you back. While no plan for protection is fool-proof, taking the following steps can deter unwanted guests to your property and might also secure you lower costs for the insurance:
Don't forget to retrieve any security equipment you use to protect one property, as you can continue to use it for the next home you buy for flipping while it's vacant too, further increasing the value of the equipment as an investment. It could also be tax-deductible for you, because it's a business expense, such as if you maintain an office on the premises while it's under your ownership, so check with your accountant come tax time.
You need to protect your investment as a house-flipper, but insurance isn't always the simplest situation to figure out. Bring your special set of circumstances to an agent or two, to get a good idea of your specific needs and how to fulfill them. Leaving any stone unturned could be very costly. For more information, contact an insurance company like Lanham Insurance Agency.