My good friend Ed Babtkis, an insurance agent I’ve known for the last 30 years (sheesh, I’m getting old & crotchety!) has a new line of business you may be interested in. You can reach him at Ross Diversified Insurance, 800 210 7677. His brother Mel can also help you.
When funding re-hab projects its best to know and understand your insurance risk and liability exposure. When borrowing to complete a rehab you must protect your source of funding. Both as a borrower and as a lender it is important to identify the risks involved when choosing the appropriate insurance that you are placing on a vacant property being remodeled.
Insurance is boring stuff designed to cure the worst insomniac. As a consequence the lack of attention paid to obtaining appropriate coverage may result in CLAIM DENIALS. A substantial loss could wipe out your investment and in turn if you are a flipper, your source of funding.
As a lender or a flipper if you decide to accept a homeowners policy or a landlords policy to cover a vacant property/remodel you are giving permission to your insurance provider to deny claims.
In almost all policy language there is a clause:
“ This policy will be void for concealment of fraud if any insured has BEFORE or AFTER a loss intentionally concealed or misrepresented any MATERIAL FACT OR CIRCUMSTANCE relating to this insurance”……..
Not disclosing at time of insurance placement that the residence is vacant and you anticipate doing ANY type remodeling, you are allowing the insurance carrier to utilize this language to deny your claim.
Another important clause to make note of that exists in most Landlord/homeowner polices is one that stats if the property is found to have been vacant exceeding a specific time period typically 30-60 days your Vandalism, Malicious Mischief and theft coverage will become excluded. Consider the following scenario: Your property has been vacant 61 days and a vandal breaks into the building, lights a fire and the building burns down resulting in a complete loss, your insurance carrier has just been given yet another defensible position to DENY YOUR CLAIM.
To avoid situations like the ones mentioned above it is best to consider a vacancy remodel policy. These policies can be written for a term as little as three months with refunds available if the policy is terminated prior to expiration. The cost may be two or three times that of a landlord or homeowners policy but this because of what it will pay, not because of what it will deny.
Insurance language will put you to sleep until you have a claim, know your coverage, know your risk and you will avoid a rude awakening!