Posted by John Corey on March 30, 2006 at 04:03:51:
The agent is more or less accurate.
Insurance companies do not like rehab projects of property where it is vacant for longer than 30 days. More so when the area is suffering from higher crime, etc. The problem is the insurance company sees higher claims when the property is vacant (break-ins, damage from water leaks that no one notices, etc).
The decision to write the insurance will vary between insurance companies.
You can get specific insurance for a property that is being refurbished. It can cost about 4x the normal rates. The policy is a builder’s policy or similar. They charge more because they expect higher claims.
Be very careful if someone offers to write a policy and it does not match the present situation. Just because an agent wrote it does not mean the claim will be paid if you have to submit a claim later. The insurance company needs to be told what is going on so they know what risks they are providing coverage for.
Eeks! My sister has a low income housing 4-plex that needed repair and rennovation. Two of the units are occupied and the third will be in a week or so. The 4th will take another month of rehab. She said the insurance agent told her they will not insure an empty building or one that is half occupied and half being rennovated. Sounds to me like a bunch of hooey, but hey what do I know. Then I thought of the CREOnline groups. I know you all have some wisdom to share here. She is really sticking her neck out, but what should she do? Where should she turn? Who should she call? Don’t say GHOSTBUSTERS!
Thanks
welcome to the club. my comments deal with commercial-type policies, which might be different from homeowners policies.
A vacant unit is a lot more likely to be vandalized, burglarized, torched, etc. That’s why IC’s require you to carry special coverage.
In the past couple of months, I had two rehab properties tagged by my IC. They actually sent someone out to take photos!! and noticed a permit on the front door and a crew working on the roof. uh oh. rehab city. They pulled coverage. I then got a “vacancy” policy, which is sort of like a builder’s risk policy. something like $240 for a 90-day $60K policy. expensive, but not a deal killer.
In the old days, the IC’s never did site inspections ( at least not on my stuff). so they never had a clue what was being rehabbed and what was occupied. but starting last year, all of my carriers got aggressive. Now I get punchlists of repairs I must make to keep up my coverage. The Nerve! The stinkin’ IC telling me to replace a window or patch some missing masonry…
it gets worse. that are now doing site inspections on renewal dates!!
