Real Estate Investor · Baltimore, MD · Member since 2008 · 619 posts · 75 votes
We are currently rehabbing a house, and have had problems with two insurance companies. One dropped us, because the downspouts and siding were messed up, the next cause the house is vacant.
I was trying to avoid an expensive builders risk policy. We should be moved in within two months. What are our other options, if any?
Loveland, CO · Member since 2008 · 1k+ posts · 123 votes
17y
Move "some" furniture in. I used to have a daybed, radio, portable TV, card table and chairs and a "go kit" of kitchen junk. That way my places looked occupied and I could spend the night if I wanted to.
Downspouts and siding sounds like just an excuse to me.
Attorney · Raleigh, NC · Member since 2008 · 4k+ posts · 1k+ votes
17y
That's fraud. You can do as you like but the difference between a regular policy and a builder's risk is usually only a couple hundred dollars. What's your integrity worth?
There's a reason there is a builder's risk policy. Properties are more susceptible to loss by vanadlism, theft and arson when they are not occupied. If you want higher risk coverage, you need to pay a higher premium.
The downspouts and siding being messed up is not an excuse. You have undetermined amounts of water entering the property leading to a higher potential of mold growth. Because of the scare fueled by ligitation attorneys over mold growth, insurance companies have had their underwriters scrutinizing these properties heavily since about 2000. There's also a centralized database of all properties affected by mold that all Insurance companies share.
Real Estate Investor · Charlotte, NC · Member since 2008 · 368 posts · 42 votes
17y
Builders risk policies at least here in Charlotte area are not that expensive. What if something actually happened to your home. Wouldn't you like to be compensated accordingly.
If you are nickle and diming over a builders risk policy maybe you should reconsider whether it is worth it to you to be an investor.
You are looking to pocket thousands and you are having a problem with paying a few hundred to protect your assest.
Attorney · Raleigh, NC · Member since 2008 · 4k+ posts · 1k+ votes
17y
Well, no one likes to pay too much for an insurance policy and I know many of us feel like we keep paying for something we never use. I can understand wanting to legitimately keep insurance costs down. The biggest way is to get the rehab done fast and get it tenanted so you can get rid of the builders risk. As soon as your done with the rehab and have someone in there, call your agent and have them change your policy back to normal. You'll get a refund for any builders risk coverage you may have prepaid for.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
17y
Originally posted by Tim Wieneke:
As soon as your done with the rehab and have someone in there, call your agent and have them change your policy back to normal. You'll get a refund for any builders risk coverage you may have prepaid for.
I've found that's not the case. The "vacant property" policy I bought at the start of a rehab was a fully paid policy or some such. It was a three month policy. Bottom like was that even if I finished the rehab and had it rented in a week, I would not have received any refund.
Attorney · Raleigh, NC · Member since 2008 · 4k+ posts · 1k+ votes
17y
That doesn't sound right. Foremost did refund it for me and Shelter told me they would. I even got a check in the mail back from Foremost...and my agent arranged it that way from the outset even though it would mean a slightly lower commission from him.
Edit - I remember now how we did it. Foremost took the builder's risk. When we were done with builders risk, we changed to a standard policy with Shelter and cancelled the Foremost policy. Maybe it was something about changing insurance carriers that let us do it.
Lender · Omaha, NE · Member since 2008 · 1k+ posts · 1k+ votes
17y
I have also used Foremost to insure vacant properties while rehabbing. Like Tim, I received a pro-rated refund once the unit was occupied- but I also changed carriers once rehab was complete.
I would suggest you bite the bullet and get the vacant property policy while rehabbing, then either change your policy to rental ins. or switch carriers.
In essence you will only pay for the vacant policy on a prorated basis, so you won't be out that much dough- especially compared to the risk of potentially having your policy voided by fibbing on the occupancy status.
Investor · Kern county Riverside County, CA · Member since 2008 · 494 posts · 261 votes
17y
I just got a quote from Western Security Surplus for vacant property insurance. It was just under $900 for three months, paid upfront. Does this sound in line with the prices you have been hearing?
Lender · Omaha, NE · Member since 2008 · 1k+ posts · 1k+ votes
17y
Unless I am mistaken, it is not law. It is normally a lender requirement however. If you pay cash for an uninhabited property and you do not purchase insurance, that is your choice.
Of course, you would be assuming a huge liability risk if someone was injured/killed on your property...