Insurance on flips when acting as GC?

Question

I've read up on a bunch of posts about insurance for flips but most of the answers were very specific to the individuals situation and I wasn't able to find the info I was looking for.

I'm going to be buying my first flip soon and I don't plan on hiring a GC, only subs. It will be mostly cosmetic, maybe take down a wall or two but nothing crazy (at least on the first one). What type of insurance do I need to have all my bases covered during and after rehab?

Builders risk for physical property? GL for injuries? Vacant lot after the rehab is done?

If a sub gets injured on site does that fall on me as homeowner or acting GC? Do most subs have their own insurance for injury? I've seen some people mentioning workers comp but if I'm only hiring 1099 subs that wouldn't apply correct?

Thanks in advance

David M. · Answer

@Brandon Stiles

Geez, if you are that worried maybe you shouldn't be investing there!! LOL  Do homeowners who get work done have that many issues, too?

Either way, just get their insurance and have yourself/company added as additional insured. You'll show up in the bottom left hand corner.  Some insurance agents are still sending me the proof each year...

So, i guess it depends on your state and locatlity...  well, by "definition" handymen are uninsured.  Otherwise, in most places I thought they need insurance.  For example, in NJ electricians and plumbers require licensure.  As part of that they need insurance.

All other work requires a Home Improvement Contractor (HIC) REGISTRATION --- its always erroneously called a licence.  Anybody can sign up for it, you just need General Commercial Liabilityand Workers Compensation policies.  If you are doing paid work on for somebody else, you need this registration.  So this includes, roofers, drywall, landscapers, flooring, etc.

In your case, especially since you are flipping, you should ask for proof of insurance before starging a job.  If they squirm about it, then it sounds like you shouldn't be working with them.  I suppose the only "good" squirming is if for some reason youwere going to do a cash deal.

What the policies cover... Took me decades to figure that out.. and I still think I might type it wrong.  Here goes:  Liability coverage is something like you were "negligent" (which is a legal term, but using it that way).  So, if you didn't put salt out and a worker slipped on the ice..  You knew there was a loose step and your tenants or worker tripped on it...  there is an exposed wire that you didn't take care of..

Property coverage, specifically builder's risk, should just cover physical damage to the property.  obviously fire is one...

Worker's comp covers a worker, not the employer, if they get injured.  So, here is where I get fuzzy since i THOUGHT it gets wonky..  WC covers the lost wages from the injury...  Liabiilyt would kick in if it wasn't a straight up "accident."

So again, the only reason why you'd get your own policy is if you hired somebody who didn't have it.  Basically, you are paying for their insurance.  Its a headache since some to most policies will audit you every year.  You need to submit how much you paid for each trade.  Then, if they don't have insurance, you will be charged a percentage on that work --- yeah, its like another tax.

Does that make sense now?

David M. · Answer

@Brandon Stiles

the additionally insured doesn't/shouldn't raise the premium.  Honestly, for my flips I never really fussed about whether my llc was named there.  However, 99% put me there.  From my point of view, its industry practice --- I forget the exact benefit of being ther.

Yes,they can take you off anytime.  The number of mailings I get is dropping off as I haven't flipped since covid.

Even if its one job.. its all good.

Brandon Stiles · Answer

@David M. That definitely clears things up! It's not that I'm in a bad area or I don't trust people, I just want to make sure I'm not overlooking anything that could come back to bite me! I think the obvious answer is to make sure everyone I hire is fully insured and to require COI. As far as the additionally insured, I'm assuming that raises the subs insurance premiums - would I be expected to reimburse him for that extra cost? And what if I only hire him for one job instead of a consistent on going relationship? Can they just remove me at any time?

Brandon Stiles · Answer

@David M.Thanks for the response. In your experience are most subs actually insured?

I'm just worried about "that one time" I'll hire a guy who's not insured to do a simple job and he'll accidentally (or intentionally) get injured and try to come at me with a suit. I'm willing to pay for peace of mind to avoid liability as much as possible.

Would construction GL cover me for any injuries that happen on site?

David M. · Answer

@Brandon Stiles

You seem to have it down...

But to your last para..  Your subs/trades should have their own insurance.  You should confirm that by requesting proof of insurance.  It will be on that "Accord" form that is separately send from their insurance company/agent.  Yes, you are looking for them to have their own liability and worker's comp policies.  I have no idea how your area's licensure works (as it relates to insurance).

For the property, if you are flipping it then you'd want builder's risk.  When done and if it going to sit empty for a while, then there is the one in between (I think its called vacant building or somethign).  Hopefully, you have a good insurance agent.  They would make sure you have the right policy.

GL & WC only if you want the extra coverage.  But, your trades' own policies should be enough.  If it blows through theirs and there is left over liabiilty to need to hit you, then... it some huge claim...  Your policies would only be necessary if the sub's policy gets maxed out is my understanding.

good luck.

Insurance on flips when acting as GC?

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