Insurance for Flips

[David Moon]

I've read a lot of the discussions about this topic, and still feel the need to know the following. Cut and Dry.

Do I need ACV or RCV?

Do I have coverage up to my loan amount or up to my ARV?

Do I need builders risk AND vacant property insurance?

Does builders risk only cover injury liabilities and vacant only cover property damage?

Vandalism AND Theft endorsements?

Thank you for any help/guidance you can lend!

[Derek Lacy]

I find a renovators risk policy to be the best for this situation.  Why?  It's purposefully created to take care of this exact issue.  On RC vs ACV, it is ACV on the home (depreciated value) and replacement cost on the renovations.  So it's a bit of it pays out based on what you have in it.  Because you bought the house at a depreciated value, but you will put the renovations in at replacement cost.  

As for the coverage amount.  Imagine this, you spend time a treasure on this house.  The day before closing it burns down.  Do you only want the money you put into it out of it, or do you want your profits included?  That's really up to you.  I personally would want my profit for the time I put in.  It costs a few extra bucks, until the claim happens, then it made you many extra bucks.

They hybrid that is renovators risk, includes both builders risk (the renovations) and vacant dwelling (what you paid for at closing).  I would also recommend liability coverage, which is an addon option with renovators risk.

Vandalism and Theft.  Considering that's what happens to flips, much more than fires, etc.  I highly suggest it and it is normally covered under a renovators risk.

There are about 3 underwriters currently offering renovators risk.  It is a newer type coverage (been around about 10 years).  It was made for the flipping industry, though I see so many flippers choose vacant dwelling and call it a builders risk.  

We write in all 50 states, so if you need any advice specific to your project, you can find me below.