No two insurance policies are exactly the same. When it comes to insurance on residential properties purchased with the intention of “flipping”, there are a number of factors that the insurer companies consider in determining the level of protection they will offer and the premium they will charge.
Many insurers will not provide the coverage, others may provide limited coverage and then there are those who specialize in this class and will have various options. Not only that, the companies that will write this type of insurance change based on existing economic conditions and incurred losses.
1. When should I contact my broker about the insurance?
As soon as you know which property you are buying. They can assist you through the process and ensure the paperwork is ready for the bank or finance co.
2. What are the main challenges insuring an older home?
Aluminum wiring and 40 or 60 amp is more likely to cause fires so many insurers won’t offer coverage. If they do, the premiums are usually much higher!
3. How much insurance should I carry?
Coverage can be Replacement Cost (cost to rebuild) or Actual Cash Value (ACV). ACV means that there will be depreciation applied to your claim and you will pay a portion of the cost to repair or rebuild. Many brokers have software programs to help you assess building replacement value on your residential property. What you paid for the house and lot has no bearing on the insurance amount. That is market value only.
4. Is the coverage all risk or named perils?
All risk coverage provides all risk of physical loss or damage subject to standard exclusion. Named Perils only covers certain types of losses.
5. How long should the policy period be?
Just in case renovations are delayed or the house doesn’t sell quickly, it’s easier to purchase an annual policy and cancel when it’s sold.
6. What happens if my property is vacant?
All property insurance has a 30-day vacancy clause. If you don’t arrange with your insurer to add a vacancy permit, you will have no insurance after 30 days.
7. Is there coverage for water damage?
Water damage means anything from sewer back-up, overflow of water from a domestic appliance, frozen burst pipes or flooding. Not all of these may be included so ask your broker.
8. How much do I have to pay in the event of a loss?
Policy deductibles can range from $1,000 up to in some cases $25,000 depending on your loss history and the type of loss. Remember, the higher the deductible, the lower the premium. What’s your risk tolerance level?
9. Are there any warranties in the policy?
So, what’s a warranty? It’s your promise. Let’s say your building is vacant. The insured has provided you with a “permission for vacancy” endorsement with a 72-hour Supervision Warranty. If you do not check the property as outlined in the warranty and you have a loss it won’t be covered.
10. Should my contractors carry insurance?
Absolutely! House flipping has additional liability exposures that your contractors should be responsible and liable for. Ask for a Certificate of Insurance to confirm they have coverage and ensure that they are licensed!
Heather Cournoyer, CCIB, CIP is a commercial insurance expert who loves to take the mystery and confusion out of buying insurance. She does that by working closely with her customers to learn what they do and why they do it. Then she makes sure that the insurance they purchase is what they need and want when something happens. As your broker, she also acts as an advocate when and if her customers have a claim.
Heather makes it a point of understanding changing insurance market conditions. In addition, she can explain the difference in coverage, limitations and exclusions that may apply. She can find the right insurer for the level of protection you need at a price you can afford.
Email today at email@example.com