Insurance and Rehab Projects

Hello, good day to all, I have a question about insurance coverage during an rennovation project. Which of the below mentioned insurance policies will cover an investor in the event that items are stolen from the property during the rehabilitation phase of the project?

1. Buider’s Risk
2. Landlord’s Policy
   3)General Commercial Liability Insurance

Thanks to all for the responses.

Wealthinvestigator-

I take out a new Builder’s Risk policy for each rehab I do (required by lender). I have a general liability policy that is renewed each year (cost about $1500.00 up to $1 mil), and I can add each new property to it for $150/ per property.

However, the Builder’s Risk policy has a deductable of $500, which only really covers major theft. I found this out the hard way, when $400 worth of windows were recently stolen but I had to cover them out-of-pocket.

I have a landlord policy for another house I own with tennants, but it doesn’t do any good if the house is vacant (or, actually, if the rented house goes vacant for more than a few months).

Best wishes,

Dave Gorman

Thanks for the information dgorman, and I appreciate the link to the website. Good fortune and profits with your rehab endeavor.

In my investigation about rehabs, I have discovered that the following factors are important when working with contractors

1. Making sure that they have proper and active liability insurance policy?
2. Making sure that they are licensed and bonded by the state
3. Making sure that they do not have a poor reputation with the Better Business Bureau

In addition, I have read that it is important when entering contractual negotiations with a contractor to include the following:

1. Draw Schedule
2. Clean up Clause-WorkSite must be cleaned up after worked is performed to ensure that someone that is passing by the property cannot be injured by debris on the jobsite (to prevent litigation against your company)
3. Damage Clause-Any damages that are performed by the contractor will not be passed on to the investor
4. Late Penalty Clause (Every day that the contractor/subtcontractor is late in completing a portion of the project, he is fined $100 or whatever amount)
5. Party or Parties that will Provide Arbitration in the Event of Disagreements ( Better Business Bureau or other organization)

My questions are the following:

1. Are most contractors in your experience willing to accept the Damage Clause, Late Penalty Clause and Clean up Clauses in a contract?
2. Which of the previously mentioned clauses are most important to enforce in a contract with a contractor? (in the event that most contractors wil not accept all three)
3. In regards to the Draw Schedule, how should you allocate the funds to the contractor to ensure that he is not going to run off with your money?
   Example 5% of the total cost of work when you sign the contract, and then 20% after two weeks of work peformed.

Any feedback provided will be helpful. Thank you.

when you make a draw payment, get a lien release for that portion of the project. so, if he doesn’t complete it, and you hold that final payment, he cannot lien you for the full amount of the project, only the unpaid part.

Thank you McWagner for the response. From your response, it is wise that when I make a draw payment, I receive a lien release for the portion of the project. I have some questions about this lien release process.

1. Is it customary for contractors to automatically provide a lien release upon receiving payment (via the draw schedule) for a portion of the job?

Or

2. It wil be my responsibility to request (verbally and by wording in the contract) that he will create a lien for each unpaid portion of the pproject and upon myself making payment for the portion of the job he has completed, he must issue a lien release for that portion of the project?

I want to understand how I should discuss this subject matter verbally and in writing with the contractor.