Builder's risk insurance and Sub2

[Christopher Morin]

Hey everyone,

So I'm only a week out from closing on my first Subject to: deal, and while I think I have my ducks in a row, I have some questions when it comes to insurance.

I'm "taking over" 89,000 worth of loan from the seller, and need to put a completely new roof on it as part of a flip. Total rehab is approx. 36,500. I had my insurance agent quote me with a 6-month Builder's Risk policy, and we're cancelling the seller's insurance policy (which is currently with the lender! Ugh.). We'll swap insurance policies effective at closing, and we plan on flipping this property within 3 months. I'm not too concerned about the DOS being called because of the exit options I have in place, but I still would like to avoid it.

I have 3 questions...

1) What extent of coverage has everyone used in rehab policies? Right now I have just the investment basis (loan + rehab costs), but I'm considering upping it to my expected ARV instead. The 6 month premium is $585.00 for $125,000 of property coverage on this Florida policy.

2) Would this builder's risk policy, being only a 6-month policy, throw a red flag and make the lender freak out about not having a full year's policy in place? and force place their own insurance instead?  or are they typically just concerned with having the place insured at all?

3) Should I just press to have a renter's policy instead, with the full year coverage?  I won't need the extent of that coverage until the project is finished (3-4 months), but if it eliminated headaches than maybe it's worth it.  I'm also worried that the current condition may be "uninsurable."

Thanks.