First Flip: General Liability Questions

[Marcie H.]

I am getting ready to start my first flip in Knoxville, TN and finalizing the contract with the general contractor. This contractor has come highly recommended and has an amazing list of both residential and commercial references which have checked out. My concern however is that he does not carry general liability insurance. Do you feel a builder's risk policy and vacancy insurance as well as a Release of Liability from the GC is enough to continue on? Also do you think it's fair to deduct the cost of the builder's risk policy from the contractor's payment since it will cover all of his equipment as well?

[Ingrid J.]

@Marcie H. Welcome to Biggerpockets!

Having worked with commercial insurance for years I can tell you that it's not a good sign that a professional contractor does not have a general liability insurance. Although I don't work in the industry anymore it used to be a requirement to partake in professional real estate developments here in Norway. 

You should ask insurance companies in your state what the best practises are. If lacking a general liabiltiy insurance the contractor won't be able to cover damages if they are found liable. Also check that they have some sort of workers compensation insurance for their people should they be injured while at work and wish to blame you for it.