The insurance side of house flipping


Remember insurance needs when flipping a house.

It’s a classic TV reality show scenario: A young, ambitious couple purchases a foreclosed property and flips it for a huge profit. This quick cash flow seems too good to be true…and usually is.

The thrill of flipping a home often overshadows the harsh reality that profitable house-flipping opportunities are few and far between. I can honestly speak from experience. My wife and I were one of these young, ambitious couples that decided to dabble in the exciting world of house flipping. Although the experience was rewarding and challenging at the same time, we learned some valuable lessons. Potential house flippers should consider some insurance coverage issues before making a commitment:

  • Contemplate the cost of insurance when purchasing a home. If the house does not sell within a few months, insurance is a continuing expense that needs to be included in your budget.
  • Make sure you do your research when selecting an insurance company and policy. Your local independent agent can help you. Some insurance policies provide additional coverages you may need. Consider choosing one that provides limited coverage for water damage and fungi, wet or dry rot or bacteria. These issues often go unnoticed until after a remodeling project begins.
  • Discuss with your agent insurance to value – the need to insure the home for its reconstruction cost. Just because you purchased a home for a certain price does not mean that the home can be replaced for that amount. There can be a huge discrepancy between market and replacement cost values. Your agent can also recommend builders’ risk coverage for the remodeling cost of the project.
  • Consider the cost of building materials going into the refurbished home. Your insurance agent can add an installation floater – coverage for movable property – to your policy to insure construction materials in transit and at the jobsite.
  • Allow plenty of time to purchase insurance rather than waiting until the last minute. Contact your agent and consider an insurance company that will provide coverage for a house undergoing renovation. Some companies may consider this a vacant home and deny or limit coverage for vandalism, theft or other perils.
  • Before you allow contractors to start work on your investment, first confirm that they are insured. The safest bet is to request a copy of each contractor’s general liability policy declarations page. Make sure that the policy has at least a $1 million per occurrence and general aggregate limit.

By keeping these insurance needs in mind, you will better position yourself to reap in the benefits and rewards of house flipping, protecting your investment and personal assets at the same time.

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3 Responses to “The insurance side of house flipping”

  1. Rebecca Brown

    These are great and would be nice if you could make an option to create a printable version from this screen.


  2. Don

    So the question is does Cincinnati do this type of insurance or not? I had a policy, written by an agent and it was canceled because it was a flip house. “Not occupied”. I love the article and it’s spot on, but if you DO write these, maybe your house should have a meeting to discuss and get everyone on the same page. Underwriting is saying CinFin doesn’t want to do this line of business.

    • Cincinnati Insurance

      Thank you for your email and for reading our blog. While we don’t insure houses undergoing a flip on a homeowner policy, we know that this is a growing area of interest for many people around the country and wanted to provide information to consider from an insurance perspective. Sometimes these risks are better insured on a business insurance policy.

      One of the benefits of working with an independent agent is that your agent can access many insurance markets. Talking with your agent about your insurance needs during a flip will ensure that your investment is protected. Good luck with your remodels!

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