Fix-and-Flip & Hard-Money Loan Insurance: Builders Risk, Vacant or Landlord?
A flip moves through three stages: bought, under renovation, then sold or rented. Each stage has a policy written for it, and the lender's draw schedule depends on the property staying insured through all of them.
During the rehab: builders risk
Builders risk (renovation) insurance covers the existing structure plus the work and materials as the project goes. It is usually written to the as-completed value or the total of purchase price and rehab budget, for a 6- or 12-month term. This is what most hard-money lenders ask for when rehab funds are being drawn.
Empty but no work yet: vacant dwelling
A home that sits empty before work starts, or after it finishes and before it sells, fits a vacant dwelling policy. Standard policies restrict coverage after 30 to 60 days of vacancy, which is why lenders will not accept them on an empty house.
Rented after the rehab: landlord
When a BRRRR project is refinanced into a rental loan, the policy changes to landlord (DP3). The new lender's mortgagee clause and loan number go on the new evidence of insurance.
Liability on the job site
Builders risk is property cover. Many lenders also require general liability during the rehab - typically $1,000,000 per occurrence - and contractors should carry their own.
What to send for a quote
The address, the buyer's entity name, purchase price, rehab budget and scope of work, after-repair value, closing date, and the lender's mortgagee clause and loan number. With those, a quote and the evidence of insurance usually come back the same business day.
Questions
Will a homeowners policy cover a house I'm renovating?
Usually not. Homeowners policies are for occupied homes; renovation and vacancy are typically restricted or excluded.
How long is a builders risk term?
Commonly 3, 6, 9 or 12 months, matched to the project, with extensions where the carrier allows.
Is liability included with builders risk?
Not always. We quote general liability alongside when you or your lender need it.
Get a quote today.
Send the address and your lender's details - we quote with several carriers at once and send the evidence of insurance to your lender. Or call 512-801-8702.