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Boring Title: Do I need insurance for my house flip project?

Title insurance is boring, but Allied Title & Escrow is here to decode the jargon and make it (somewhat) more interesting. This biweekly feature will explore the mundane (but very necessary!) world of title insurance while sharing interesting stories of two friends’ entrepreneurial careers.

Question: Do I need insurance for my house flip project?

Answer: If you don’t want the hassle of buying a home and renting it out to others, then buying a fixer-upper and selling it for more is the next best thing. While the process sounds rather simple, there is something really important that should never be overlooked — and that is the need for home insurance for flipping houses.

Since no one is living in your investment property, you may feel that you really don’t need insurance. However, that is not true at all. Believe it or not, there are so many things that can go wrong during remodeling projects while the house sits vacant for months at a time — such as falls, fires, vandalism, theft of pipes/fixtures and more. Traditional insurance providers and homeowner’s policies view house flipping as ‘high risk’ and are not designed to protect vacant properties or properties that are needing rehab.

Flipping houses requires a special type of insurance coverage that a typical Home Owner’s Insurance policy does not provide. The insurance policies discussed below will protect your property and personal assets and provide peace of mind.

Dwelling Policy

A Dwelling Policy is designed for vacant buildings and protects against any direct, physical damage to the property. This is a common type of insurance used for flipping houses. It isn’t always easy to see the issues that may arise during even the simplest renovations.

Although a dwelling policy is a way to remain protected, it should be noted that this policy will not cover any materials or equipment used in the renovation.

Builder’s Risk Policy

A Builder’s Risk policy is also designed to protect vacant property and it is necessary if your renovation includes tampering with the structure. This policy, again, covers the direct physical damage to the property while it is in the construction process.

Unlike dwelling policies, a builder’s risk policy does cover the renovation materials. This is often purchased as a rider in addition to the dwelling policy.

General Liability Policy

As you can tell, dwelling policies and builder’s risk policies focus on the damage to the property itself, and potentially the materials. But what about bodily injury? It is not uncommon for injuries to occur during a renovation. Should you get hurt, your general liability policy would be in place to protect you, but it does not protect your contractors or people you have working at the property.

What it does do, though, is protect you in case you are sued due to an injury at the property. Any medical expenses or legal fees that arise due to a slip and fall, for example, will be handled by this insurance company.

Have questions related to title insurance? Email [email protected]. Want to use Allied Title & Escrow when you buy a home? Tell your agent when you buy a house to write in Allied Title & Escrow as your settlement company! 

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