The insurance side of house flipping

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It’s a classic TV reality show scenario: A young, ambitious couple purchases a foreclosed property and flips it for a huge profit. This quick cash flow seems too good to be true…and usually i

The thrill of flipping a home often overshadows the harsh reality that profitable house-flipping opportunities are few and far between. I can honestly speak from experience. My wife and I were one of these young, ambitious couples that decided to dabble in the exciting world of house flipping. Although the experience was rewarding and challenging at the same time, we learned some valuable lessons. Potential house flippers should consider some insurance coverage issues before making a commitment:
  • Contemplate the cost of insurance when purchasing a home. If the house does not sell within a few months, insurance is a continuing expense that needs to be included in your budget.
  • Make sure you do your research when selecting an insurance company and policy. Your local independent agent can help you. Some insurance policies provide additional coverages you may need. Consider choosing one that provides limited coverage for water damage and fungi, wet or dry rot or bacteria. These issues often go unnoticed until after a remodeling project begins.
  • Discuss with your agent insurance to value – the need to insure the home for its reconstruction cost. Just because you purchased a home for a certain price does not mean that the home can be replaced for that amount. There can be a huge discrepancy between market and replacement cost values. Your agent can also recommend builders’ risk coverage for the remodeling cost of the project.
  • Consider the cost of building materials going into the refurbished home. Your insurance agent can add an installation floater – coverage for movable property – to your policy to insure construction materials in transit and at the jobsite.
  • Allow plenty of time to purchase insurance rather than waiting until the last minute. Contact your agent and consider an insurance company that will provide coverage for a house undergoing renovation. Some companies may consider this a vacant home and deny or limit coverage for vandalism, theft or other perils.
  • Before you allow contractors to start work on your investment, first confirm that they are insured. The safest bet is to request a copy of each contractor’s general liability policy declarations page. Make sure that the policy has at least a $1 million per occurrence and general aggregate limit.
– Cincinnati Insurance Companies

The top 5 reasons to promptly report a claim

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Your insurance policy is merely a promise until you have a claim, but many people hesitate to report a claim to their insurer. Here are five reasons why you should promptly report a claim if you have an incident.

    1. TO ASSURE THAT COVERAGE IS NOT AFFECTED
      Coverage is contingent on prompt reporting. Your policy defines specified conditions and requirements for coverage, and one of them is usually your duty to report a loss just as soon as practical after the loss occurs.
    2. TO HELP RESOLVE YOUR CLAIM PROMPTLY
      Early investigation is vital in determining liability and damages. Obtaining key evidence, scope of damages and interviewing all parties while information is clear assures your claim is accurately assessed and given every consideration.
    3. TO IMPROVE SUBROGATION SUCCESS
      Prompt reporting is vital when subrogation is needed to pursue a claim against the responsible party. Subrogation enables an insurance company, after paying a loss to its insured, to recover the amount of the loss from another who is legally liable for it. Prompt claim reporting makes it easier to determine facts, obtain expert reports and collect evidence early on, leading to a higher likelihood that the not-at-fault policyholder can recover the deductible. It also helps keep claim costs – and therefore insurance costs – low.
    4. TO PREVENT ADDITIONAL DAMAGE
      By reporting your claim early, immediate remediation can prevent further damage. This ultimately lowers claim costs and helps keep premiums low.
    5. TO PROTECT THE ABILITY TO DEFEND A CLAIM
      The insurance company has an opportunity on claims involving injury or damage to people other than the policyholder (third parties) to negotiate an early economical settlement. Late reporting could allow key evidence to be lost or destroyed, leading to a not-so-positive outcome for all parties involved. (The Ohio Insurance Institute’s glossary defines third-party coverage and first-party coverage.)

Let the insurance professionals do the work for you. You are paying a premium and deserve to have a complete policy review, inspection and investigation to determine if you have coverage.

When in doubt, ask your agent or insurance company for advice on whether to submit a claim. Always report it promptly (even as a “record only”) so you adhere to your policy conditions and duties.

Homeowners Coverage Changes

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Homeowners claims have been an issue with most of our carriers due to the increase in the severity and frequency of storms over the past several years.
Some companies have implemented several measures to offset the high cost of claims from these storms. One of these measures is to amend coverage the
companies offer. Some of these changes are important to be aware of:
Roof claims are being settled on ACV vs RC basis: If your roof is 15 years old or older and a loss occurs, you will be paid based on actual cash value vs the cost to replace your roof. The insurance company will take into consideration the age and condition of the roof and depreciate the cost to actually replace it.
Reduction in Water Back-Up Coverage: Most of our companies automatically provide some coverage for losses that are caused by or result from water that  backs up through sewers or drains. The limit that they offer may have been reduced on your renewal policy. There are limitations to most coverages on your Homeowners Policy and needs sometimes change. It is important that you review your Homeowners policy to make sure you have adequate coverage. Some companies are offering new roof discounts or the actual cash value endorsement on the roofs can be removed if you have
recently put on a new roof. The water back up coverage limit can be increased and most insured’s with a finished basement should be aware
of this limit and more than likely will require additional coverage. Please note that these types of changes can only be made upon the renewal of your policy. Please contact our office if you have any questions regarding your policy or would like to make changes in your current coverage.

Helping avoid large audits

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General Liability and Workers Compensation premiums for business owners are based on the actual sales and payroll for a policy period. Sometimesour clients have a better year than anticipated or have an increase in hiring staff. Here are a few tips to avoid any large audit premiums:

  • Notify our agency if there are noticeable increases in sales or payroll. We can adjust the policy at any time to reflect these increases avoiding a large
    audit bill.
  • Obtain certificates or state-approved exemption forms from all your subcontractors. These will be required at the time of the audit.
    Any subcontractors that you do not maintain these forms on will be considered as employees, therefore, will increase the amount of payroll you will be charged for.
  • Sales & Clerical payroll cannot be split between different class codes. For example, if you have an employee
    that works in the office and also helps in stocking shelves, our company will take the higher of the two class
    codes, which in this case is a store class and charge the entire payroll under that class.

Snow can be hazardous to your health

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Snow can be a beautiful thing…until you have to shovel it.

Every year, hospitals treat patients with back injuries, muscle strains and even heart attacks caused by shoveling snow. While the risk is probably low for most healthy people, those who are older, out of shape or who have pre-existing medical conditions such as heart problems or asthma may need to be cautious and should consult their doctors before exerting themselves.

Here are some things to keep in mind as you arm yourself to battle winter.

 

Protect your heart and your back

  • Follow any restrictions your doctor recommends. The combination of physical exertion and severe cold temperatures can increase the workload on your heart.
  • Warm up your muscles before you shovel, just as an athlete would warm up before physical exertion.
  • Move more, light shovel loads rather than fewer, heavy loads and, where possible, push the snow instead of lifting it.
  • Keep ahead of the snow. It’s less stressful to remove 2 or 3 inches at a time rather than wait to remove a 6-inch snowfall all at once.
  • Follow guidelines to avoid cold stress and stay alert to symptoms of hypothermia: drop in body temperature, shivering, slurred speech or confusion.
  • Dress appropriately for the weather, with footwear that won’t slip. Dress in layers for ventilation and insulation, with a top layer that repels water. Don’t overdress.
  • Use a lightweight, strong shovel with a handle long enough to prevent you from bending.
  • Pace yourself; take frequent breaks.
  • Stop and drink water to prevent dehydration.