Insurance For My Rehab
I'm closing on my first fix and flip property on Thursday. I got a quote from Formost Insurance and wanted to see if this sounds reasonable.
$1484 for 12 month policy. First payment is $314 and I'm on a10 month plan for the remainder.
$40,000 on the dwelling (The house appraised at $72k should sell for around 110K after a roof, siding and interior cosmetics)
$100K on Premise Liability
$1000 medical
Sound about right?
Thanks in advance for your input
Sounds like too much! I've never paid more than $250.00 for a years worth of fire insurance. I have a rider on my personal homeowners policy that extends liability coverage to each of my rental properties or my rehabs while they are in process. I can't imagine paying that much but I don't know how the premiums are in other states. I go through an independent agent who ties everything together for me at a really great rate.
Way too high.
I pay around $700/yr for a replacement policy worth 170k. Shop it.
Well, here's how I do it. I simply add it to my homeowners policy. They don't seem to care if it's a rehab and I even tell them it is. I pay about what you would pay for a normal homeowners policy. I think the last one I did was $314 for full coverage for a years premium for a $100k house. The catch is that the house can only sit vacant for 60 days. After that I would have to pay a great deal extra for a vacant house policy. Personally I have never had a problem with this. I don't do major rehabs anymore. I mainly just get a house that I can fix up in a month and then I am always able to get it rented(which is what I usually do with mine) within a month.
I just closed on a rehab last Thursday. I wound up getting a 3 month policy for $250 that is specific to vacant property. If I need to renew it my contractor has agreed to pay. This particular policy does not pro-rate so there will be no refund.
The rate is not terribly different than insurance for an occupied building.
Just my 2 cents...
You get that for which you pay. If you want "cheap" coverage, expect "cheap" protection. Foremost's policy is the best rehab/flip policy in the market, at least in the 15 states we operate. The rate per year may seem high, but there is no question of coverage for vacancy, or value of your rehab work (you insure the property AND the value of the rehab, most policies don't consider this).
Some of the posts here concern me as to the correct coverage.
1. You may tell the Agent regarding the rehab/vacancy, but not every Agent relays the info to the company, hoping they don't inspect it (sad, but real-world). If there is a vacancy clause in the policy and a claim occurs, be sure the insurer will battle the coverage benefit.
2. Most rehab policies don't offer "replacement" coverage until the work is near to or completed.
3. The "builders risk" policies don't usually offer a refund for unused premium/coverage. Foremost does. If you only need it for 3 months, according to your figures, you only pay about $125 per month. Don't get hung up on the annualized premium, as Foremost will prorate the unused portion back. Their pay plan, unlike most companies in the rehabber market, gives you the ability to NOT tie-up money upfront.
4. If you extend your liability coverage from your home, you put not only your personal insurance at risk, but also your personal assets. Not good advice, unless this doesn't concern you.
Check into a higher deductible, say $2500 or even $5000. If you only need it for a few months, it's better to have proper coverage. Use the deductible as a cost-savings mechanism, not denying. or shortchanging the policy itself.
The Foremost policy was/is designed for the investor rehabber. Scottsdale has a policy as well, but the rates are higher in most of the states we operate. There aren't many companies willing to offer a policy for this market at all.
It is difficult, if not impossible, to compare insurance situations in different areas, let alone different states. There are many variables that determine the rate.
Sorry if I sound as if I am defending the insurance industry. I am not. I want to make sure the pitfalls of the "cheapest" policy are understood. Use an Agent that understands our business and how to properly protect you and your assets. (This may or may not be an independent Agent). The best rate usually doesn't equate to the best, or even the proper, coverage.
[ Edited by norrist on Date 12/10/2003 ]
Here in Florida, insurance is a huge problem. State Farm - my home owners insurance company - does not even write hazard insurance policies. It is very difficult to find a company that will write policies for homes over 30 years in age. You must have an inspector verify that the house has updated electric, updated plumbing, CHA. Oh, and no dogs allowed. You sign a waiver for coverage on any dog claims.
Adding rehab properties to your home owners or adding riders to your home owners? Are you sure that you will be covered if there is a loss? Insurance agents are not always detail oriented and often tell you "not to worry about it". I always have to correct the property address, remind them that I need 300k of liabilty, etc. My agent once told me not to worry about the dog waiver. My agent is giving landlord advice? My first thought is to always buy the correct insurance. If you do not want to buy the correct insurance - one that will cover you when you have a loss - then why even bother. BTW - I had a fire at one of my rentals.
I pay approximately $370 for a hazard policy with 300k of liability on an 1960 home and $460 for a six month vacant policy with 300k of liability. When I buy a rehab I buy the vacant policy because my hazard policies will not allow a house to be vacant more than 30 days. I can not rehab and rent a place in less than 30 days. Hell, I can not rent a single family home in 30 days - please tell me your renting secrets.
Brenda
Boy! people get touchy about their insurance! As I mentioned above, I add mine to my homeowners but I am not advising anyone else to. Unless everyone I have spoken to(I think 4 different agents) is wrong, my homeowners insurance covers my rehabs for 60 days while vacant. I don't care if it is attached to my homeowners from a liability stand point. How is having a special policy for a vacant house going to protect it anymore? If I am sued because of some negligence on my part, they are going to try sue me and take everything I own without regard to what kind of policy I have. That's what LLCs, corporations, etc. are for from what I understand. As far as renting houses goes, I have mentioned how I do it in other posts. I never have vacancies. I always have people asking me when I'm going to have another house available. If you want a bottom line on rentals, if you can't rent it your rents are too high. If you can't lower your rents, you paid too much or you haven't learned how to operate more economically than your competition.
Norrist,
I appreciate your passion about insurance. This is one area that people do not take lightly until it is needed! On a previous post you mentioned using foremost and I looked into it. It is a zurich company but like all insurance companies there are subsidiaries that write the insurance a little different. My guess is this is for marketing reasons.
I truely like foremost if they will refund the unused premium. Rehab takes 3 months, no need to pay for a year policy!
I want to give a formal thanks for your input. You are truely an asset to this board.
"Passion"??? I must sound like a real blast at the TCI Xmas party!
Insurance is the necessary evil (not to mention boring)! I just hate to see the misinformation spread by unwitting Agents that hurts the consumer. It makes all of us Agents look bad. Too many of my profession still try to sell with price, to make the sale. Oh well... Thanks for the kudos! [ Edited by norrist on Date 12/11/2003 ]