If you obtained a hard money loan in Los Angeles and purchased real estate with the intention of fixing and flipping the property, you may have asked yourself, if you may need insurance coverage for the project?
As a direct response to your questions – yes, you should have insurance on your new property. Why? Because there is a myriad of potential risks and incidents that could result in a significant loss if there is an accident on the property, vandalism, inclement weather, etc. You do not want to be the one left footing the bill in the event the property is seriously damaged or someone is injured while on the job.
Homeowners Insurance Policy is Not Enough
Many people who are new to flipping houses mistakenly believe that they are fully covered if they simply add the new property to their personal homeowner’s insurance policy. This is not the case. A typical homeowner’s insurance policy covers only risks to an “occupied” home. Unless you are planning to inhabit your fix-and-flip property, relying on your homeowner’s insurance policy is misguided.
Builder’s Risk Insurance Policy
For home flippers, consider purchasing a builder’s risk insurance policy. Why? Because it protects the property from specific types of loss that are commonly associated with construction work. In addition, a builder’s risk policy can include coverage for any damage to building materials, tools, and appliances—even if the damage occurred beyond the confines of the property. For example, a builder’s risk insurance policy typically includes a “property in transit” provision that protects your materials as they go from Point A to Point B.
Unoccupied Properties vs. Vacant Properties
When it comes to home flipping insurance, there is an important distinction between “unoccupied” homes and “vacant” homes. An unoccupied home is one that is capable of being occupied. For example, the utilities are connected and there is furniture or there are personal effects inside of the home. In contrast, a vacant home is one that is not currently lived in and would not be safe for occupancy until further actions are taken.
There are home insurance policies available for both unoccupied properties and vacant properties. These policies generally provide a level of financial protection associated with the risk of a fire or vandalism occurring at an unoccupied or vacant home.
When deciding whether this type of policy is needed, a good rule of thumb to follow is if your fix-and-flip property will be uninhabited for thirty days or more, it is in your best interest to invest in an unoccupied or vacant home insurance policy.
If you have specific questions concerning the premiums for insurance coverage on a fix-and-flip project, make sure to contact your insurance agent.
Have Questions About Hard Money Loans in Los Angeles, Contact PB Financial Group Today
PB Financial Group is a premier direct hard money, private money and bridge lender, who has been providing quick funding since 2006 and have funded over 2700 hard money/private money loans. Our objective is to work to satisfy your financing needs on important real estate projects throughout California in an efficient and effective manner. To schedule a consultation or for further information please contact PB Financial Group at 877.700.3707 or visit www.CalHardMoney.com to learn more.
PB Financial NMLS #357614/DRE #01522495