Ground up Development -what you should know regarding insurance

[Joseph Feldman]

I'm going to dive in and post on BiggerPockets for the first time, hope it goes over well.

When investing in RE the number one thing to do (after due diligence shows it's a profitable investment of course) is make sure your investment is safe and protected from physical damage and potential lawsuits.

New Construction is a very different type of risk than an existing property.

Instead of property coverage there's a builders risk policy that covers the new structure as its being built, this is pretty similar to a property coverage policy but has a very different price structure as there is only a full building at the end of construction while the risk factor of damage happening due to the ongoing construction is not there on a fully operational building.

Then we have the General Liability, the liability due to construction operations is something that is non existent on a regular property and therefore a lot more expensive, there's also a big difference if the Developer hires a fully insured GC or acts as a GC themselves which would make them liable not only as owners but also as the General Contractor responsible for any construction injuries/damages.

For a while I thought I didn't need to write about this as obviously anyone in the field knows this already, until I came across a Real Estate Investment firm that develops and operates multiple Multi Family properties that wanted us to give them a quote on a new project,

I asked them for prior development policies they had gotten and was shocked to see they were carrying either vacant land GL policies or at best "owners interest" only policies when they were operating as Owner/GC directly hiring all the subcontractors for the job.

I did not have an easy time explaining why they needed to be paying a lot more on their GL policies after they had "gotten away" with it for many years but i did succeed and have earned their trust going forward.

@Yonah Weiss