Tim Norris explains the need to have different coverage for different home statuses.
There are different coverages needed for vacant homes, occupied homes, and also homes being rehabbed.
Mike: Welcome back to the FlipNerd.com REI classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Tim: Hi. My name is Tim Norris. I’m with the National Real Estate Insurance Group and I’m today’s host on the REI Classroom. This morning, we’re going to talk just a little bit about different phases of occupancy and how your insurance may or may not apply to them.
Mike: This show was sponsored by PassiveRental.com.
Tim: In most cases, as a real estate investor, you’re dealing with either an occupied rental, a property that you’re putting under rehab. A rehab is like beauty: it’s in the eye of the beholder. It could be cosmetic. It could be a little bit more major but none the less, at least in the insurance world, a rehab is something or a property that you’re doing some work on to get back to either rent readiness or to put up for sale. And then, of course, there’s something that we would know is a true vacant property. It’s either already been rehabbed and it’s up for sale. Or with most [inaudible 00:01:04], it’s been past the rehab stage without an occupant, for let’s say, more than 60 days is a good rule of thumb.
It could vary from company to company. You should always check your own coverages but, nonetheless, 60 days is a rule of thumb we typically use. Just understand, an occupied rental, the rates that you pay typically are a lot less than on a vacant or a rehab project. Why is that? Well, of course, typically, when a property’s occupied the risk to the insurance company is less. Therefore, they’re going to charge you a lower rate. So be sure that when you’re doing a rehab or a vacant that the insurance care provider is giving you the proper coverage when you go for a proposal or a quote.
In other words, if you pay for coverage in an occupied rental and at the time of the loss, the property is either under rehab or it’s truly vacant, not only are certain coverages diminished or actually taken away but depending on the carrier and depending on the state, again, it varies state to state, they could totally deny a claim if the property is vacant when you reported it as occupied. So when push comes to shove, make sure that you’re appropriately reporting the occupancy status of any project that you’re working on just to ensure that when you need the coverage, it’s there for you correctly. Hope this helps and have a great day.
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