Should I get renovation or vacancy insurance for a house flip?

[Matt Wells]

Should I get renovation or vacancy insurance for a house flip? I am not 100% sure I will flip it, I may end up renting it. Which is usually cheaper and what is necessary? Thanks!

[Amy Verges]

As @Bonnie Low said, if the question is whether or not to get insurance at all--definitely get it. Your situation will determine what type of policy you need. I was in property & casualty insurance for 8 years, so here's my quick summary: 

• If you're doing a small renovation (no opening up walls, no additions, etc), you should get a vacant property policy.  In my market, a company like Foremost was a good option for this because they would still provide coverage on a vacant house while minor repairs were being done.  
• If it's a major rehab, you'll probably need a Builder's Risk policy like Bonnie suggested. This will cover things like building materials left on site and an unfinished structure.
• Once the rehab work is completed, if you decide to sell it as a flip, you can likely just keep either the vacancy policy or builder's risk policy in place until you close on the sale.  If you decide to rent it out, you'll need to switch to a dwelling/landlord's policy, which is similar to a homeowner's policy, but also includes things like tenant liability that a homeowners policy doesn't.  **It's important to note that the reason you don't want to get this type of policy before a tenant moves in is because most of the time there is a clause that says coverage will not be provided if the property has been vacant for 30 or 60+ days.

All of the types of policies above should include liability coverage as well, but be sure to confirm that when you sign the application to issue the policy.  I would recommend at least $300,000 in liability coverage, but it's usually pretty cheap to bump that up to $500k or even $1M sometimes.

A local independent agent should be able to give advice and write any of the above policies.  Bonus points if you can find an agent that works with or is a real estate investor themselves.  Hopefully that helps...good luck with the flip!