Insurance for House Flippers: What You Need and What You Can Skip
Insurance Is Not Optional for Flippers
Many new flippers treat insurance as an afterthought — something they will figure out later. This is a potentially devastating mistake. A single incident — a fire during renovation, a contractor injury, a slip-and-fall by a trespasser — can wipe out your profit and then some. Proper insurance protects your investment, your business, and your personal assets.
But not all insurance is created equal, and not all coverage is necessary for every situation. Understanding what you need, what you can skip, and how to get the right coverage at the right price is an important part of running a profitable flipping business. At Real Estate Sales LLC, we make sure our students understand the risk management side of investing.
Essential Coverage for Flippers
Builder’s Risk Insurance (Course of Construction)
This is the most important policy for a house flipper. Builder’s risk insurance covers the property during renovation against damage from fire, wind, hail, vandalism, theft of materials, and other covered perils.
Standard homeowner’s insurance does not cover vacant properties under renovation. If you use a standard policy and file a claim during a renovation, it will likely be denied. Builder’s risk is specifically designed for properties being renovated.
What it covers: The structure, materials on-site, and sometimes equipment. Policies typically cover the purchase price plus anticipated renovation costs.
What it costs: Typically 1 to 3 percent of the total project cost annually. On a $150,000 project (purchase plus renovation), expect $1,500 to $4,500 for a six-month policy.
Key considerations: Make sure the policy covers the full replacement value, including materials already purchased. Confirm it covers theft of materials and vandalism — common risks on vacant renovation sites.
General Liability Insurance
General liability protects you if someone is injured on your property or if your work causes damage to others. If a contractor’s employee falls through a rotten floor, if a neighbor’s property is damaged during your renovation, or if a visitor trips on construction debris — general liability covers the resulting claims.
Recommended coverage: $1 million per occurrence, $2 million aggregate. This is the industry standard and satisfies most requirements.
What it costs: $500 to $2,000 per year depending on your volume and location.
Key consideration: Even if your contractors have their own liability insurance, you should carry your own policy. If a lawsuit names you as the property owner, your contractor’s insurance may not cover you.
Vacant Property Insurance
If you own a property that is not yet under renovation — perhaps you are waiting for permits or contractor availability — you need vacant property insurance. Standard policies and builder’s risk policies may not cover properties that are simply sitting vacant without active work.
Vacant properties are higher risk for vandalism, theft, squatters, and undetected damage (like a burst pipe in winter). Vacant property insurance addresses these specific risks.
Strongly Recommended Coverage
Umbrella Insurance
An umbrella policy provides additional liability coverage beyond your general liability limits. If a claim exceeds your $1 million general liability limit, the umbrella policy covers the excess — up to $1 million, $2 million, or more.
For investors who flip multiple properties, an umbrella policy is relatively inexpensive peace of mind. A $1 million umbrella typically costs $200 to $500 per year.
Workers’ Compensation (If You Have Employees)
If you have any employees — including part-time workers — most states require workers’ compensation insurance. This covers medical expenses and lost wages if an employee is injured on the job. Even if your state does not require it, carrying workers’ comp protects you from lawsuits by injured employees.
If you use independent contractors (which most flippers do), they should carry their own workers’ comp for their crews. Always verify this before they start work on your property.
What You Can Usually Skip
Flood Insurance (In Most Cases)
Unless your property is in a designated flood zone, flood insurance is usually unnecessary for a short-term flip. However, if the property is in or near a flood zone, this coverage becomes essential — and may be required by your lender.
Check the FEMA flood maps for your property’s location before deciding.
Home Warranty
Home warranties cover appliance and system breakdowns. Since you are renovating the property and installing new or updated systems, a warranty during your ownership period is redundant. You may want to offer a home warranty to your buyer as a selling incentive, but you do not need one for yourself during the flip.
Earthquake Insurance (In Most Areas)
Unless you are investing in a seismically active area (California, the Pacific Northwest, parts of the Midwest), earthquake insurance is unnecessary.
How to Get the Right Coverage
Work with a broker who specializes in investor properties. Standard insurance agents may not understand the nuances of renovation coverage. A broker who works with real estate investors will know the right products and can often get better rates through specialized carriers.
Get coverage before you close. Your insurance should be in place before you take ownership of the property. Many hard money lenders require proof of insurance before funding.
Review your policy carefully. Read the exclusions. Understand what is and is not covered. Ask about vacancy clauses, renovation restrictions, and reporting requirements.
Require insurance from contractors. Before any contractor starts work, get a certificate of insurance showing general liability and workers’ compensation coverage. Verify the policy is active — do not just take their word for it.
Update coverage as your business grows. As you take on more flips and higher-value projects, your coverage needs may change. Review your insurance annually with your broker.
The Cost of Being Uninsured
Insurance feels like an unnecessary expense — until you need it. A fire that destroys a $200,000 renovation project, a lawsuit from an injured worker, or a liability claim from a neighbor can easily cost more than every dollar you have ever made from flipping. The cost of proper insurance is a fraction of a percent of your total project costs. The cost of being uninsured can be everything.
Protect Your Business
Risk management is part of being a professional investor. At Real Estate Sales LLC, we teach our students to think like business owners — and that includes understanding insurance, liability, and asset protection.
Ready to build a professional investing business? Register for our free Flip Cheap Houses webinar and learn the complete system for flipping houses profitably and responsibly.