It looks so easy on TV: you buy a fixer-upper, work on it for a few weeks or months, then quickly resell it for a (big) profit. And then there are the home improvement shows that tempt many people to try their hand at property flipping.
But in real life, things may not be quite as rosy as they are on screen. If you’re tempted to embark on such an adventure, Assurances Multi-Risques wants to give you some information about insurance that could save the day for you!
What to do if your home insurance company refuses to insure your property flip project?
It’s official—you’ve decided to go ahead and flip a property! Your first reflex when it comes to insuring this second property is to contact the insurance agent or broker who currently insures your home. (Nasty) surprise: they tell you that they refuse to cover this new home because it was purchased for property flipping purposes.
So how can you find an insurer who will agree to insure you? Before sharing a few tips that will simplify the process for you, we first want to explain why many insurers refuse to insure houses purchased for flipping:
Several factors affect an insurance company’s decision of whether to insure this type of projector not. Among them is the fact that a house has been vacant, which can play a big role when you buy a house for flipping purposes. To find out more about the impact of a vacant house on your insurance, please read our previous article on this topic.
Moreover, it is rare that a house bought for flipping purposes is in good condition. Most of the time, these houses that were purchased cheaply have not been properly maintained in the past. Given the condition of the building, many insurers prefer not to insure it to avoid taking on additional risks. Along these lines, we invite you to read one of our previous articles that demystifies the difference between minor and major renovations for a home insurer.
A few tips to ensure a successful property flip
Flipping a property requires time—lots of time. You first need to find a gem of a property, then you have to remodel it to maximize your profit. Then comes the selling process, which, even though you may want the opposite, can take many weeks, even months.
And that’s not all: of course, you need to find an insurer. So to save time and be efficient in your search, here are some tips:
- Contact an independent insurance broker who does business with many different insurers—especially someone who is knowledgeable about property flips;
- Be sure that you can provide the insurer with all the information they need;
- Show that you know your project inside-out by having a planned timeline;
- Do business with a contractor certified by the Régie du bâtiment du Québec for any work involving electricity, plumbing, the heating system, the roof, etc.
- Give complete information about the names of creditors (lenders) when opening a file with the broker, as this can have an impact on the insurer’s decision of whether to cover you or not, and can prevent unpleasant surprises when finalizing the file;
Also, don’t be surprised to find out that the insurance coverage won’t be the same for the house you’re flipping as it is for your primary residence, given its use.
To summarize, a property flip is certainly not the easiest type of case to insure. And this could cause some concern for you. For example, the insurance premium may also be higher, as few insurers agree to cover a property flip (don’t forget that insurance is all about risk and supply and demand). Therefore, your best allies will be your independent insurance broker and your honesty in declaring everything to your insurer, in order to avoid any problems should there be a claim.
Now, put on your hard hat and get to work!