Vacant Property Insurance: Protecting Your Investment During Rehab
You've found the perfect distressed property for your next BRRRR deal. The numbers work, you've secured financing, and you're ready to close. But have you thought about insurance?
Vacant and rehab properties are among the most vulnerable in an investor's portfolio — yet they're often the least insured.
The Vacant Property Problem
Standard Policies Don't Cover Vacant Properties
Most insurance policies — whether homeowner's or landlord — have vacancy clauses. Typically, if a property sits vacant for 30-60 days, coverage is voided or severely limited.
This creates a major problem for BRRRR investors who:
- Hold properties vacant after acquisition
- Undergo multi-month renovations
- Have gaps between tenants
What Happens Without Proper Coverage?
Without vacant property or builder's risk insurance, you're exposed to:
Total losses from fire, storm, or vandalism with zero reimbursement
Liability claims from anyone injured on the property
Lender default if your financing requires insurance you don't have
Out-of-pocket repair costs for any damage during the vacant period
What Vacant Property Insurance Covers
Vacant property insurance is specifically designed for unoccupied properties. Here's what it typically includes:
Property Coverage
- Fire and smoke damage — Common in neglected vacant properties
- Vandalism and malicious mischief — Vacant properties attract trouble
- Wind and hail damage — Weather doesn't wait for occupants
- Theft — Copper, appliances, and materials are targets
- Water damage — Burst pipes in vacant properties cause major damage
Liability Protection
- Premises liability — Coverage if someone is injured on the property
- Medical payments — Immediate medical coverage regardless of fault
- Legal defense — Costs to defend against claims
Builder's Risk: Coverage During Active Renovation
When you're actively renovating, builder's risk insurance provides additional protection beyond vacant property coverage.
What Builder's Risk Covers
- Structure during construction — The building as work progresses
- Materials and supplies — Lumber, fixtures, appliances on site
- Installed equipment — HVAC, plumbing, electrical being installed
- Soft costs — Architect fees, permits if the project is delayed by a covered loss
Builder's Risk vs. Vacant Property Insurance
| Feature | Vacant Property | Builder's Risk |
For major rehabs, consider builder's risk. For light renovations or properties being held vacant, vacant property insurance may suffice.
Common Coverage Gaps and How to Avoid Them
Gap 1: Between Purchase and Policy Start
Problem: You close on Tuesday, your policy starts Friday. A pipe bursts Wednesday.
Solution: Bind coverage effective on your closing date. We can often issue same-day coverage.
Gap 2: Rehab Takes Longer Than Expected
Problem: Your 3-month rehab becomes 6 months. Your builder's risk policy expires.
Solution: Build buffer time into your policy term, or ensure your agent can extend coverage easily.
Gap 3: Property Sits Vacant After Rehab
Problem: Rehab is done but you haven't found tenants. Builder's risk ends, but you don't have a landlord policy.
Solution: Transition to vacant property coverage immediately, then to landlord coverage when tenants move in.
Gap 4: Contractor Causes Damage
Problem: Your contractor's error causes $20,000 in damage. Your policy doesn't cover faulty workmanship.
Solution: Require contractors to carry their own insurance and add you as additional insured. Review your builder's risk exclusions carefully.
Real-World Scenarios
Scenario 1: The Copper Theft
A BRRRR investor purchased a vacant property in a transitional neighborhood. Within a week of closing — before he had insurance — thieves stripped all the copper pipes and wiring.
Loss: $15,000 in copper plus $8,000 in repair labor Insurance payout: $0 (no coverage in place)
Scenario 2: The Burst Pipe
Another investor had a property in active rehab during winter. Contractors turned off the heat over a long weekend. Pipes froze and burst, causing water damage throughout the property.
Loss: $35,000 in water damage Insurance payout: $34,500 (after $500 deductible) — Builder's risk covered the loss
Scenario 3: The Trespasser Injury
A vacant property had an unsecured rear entrance. A trespasser entered, fell through a rotted floor, and sued the property owner.
Legal claim: $75,000 Insurance payout: Full claim plus legal defense — Vacant property liability coverage applied
Tips for BRRRR Investors
1. Never Close Without Coverage
Have your vacant property policy bound before you sign closing documents. The cost is minimal compared to the risk.
2. Maintain Continuous Coverage
Work with an agent who understands BRRRR and can seamlessly transition you between:
- Vacant property
- Builder's risk
- Landlord coverage
3. Document Everything
Take photos and video when you acquire a property. Document the condition and any improvements. This makes claims much easier if something happens.
4. Secure the Property
Insurance is important, but prevention is better. Secure entry points, maintain utilities properly, and check on vacant properties regularly.
5. Know Your Policy Exclusions
Read your policy or have your agent explain:
- Vacancy periods allowed
- Theft coverage requirements
- Water damage exclusions
- Named peril vs. open peril coverage
What Does Vacant Property Insurance Cost?
Pricing depends on:
- Property location and condition
- Coverage limits
- Policy term
- Deductible chosen
Typical range: $50-200/month for a vacant property
Compare this to the cost of a single uninsured claim — vacant property insurance is one of the best investments you can make during the BRRRR process.
Get Protected Today
Don't let your next BRRRR deal become a costly lesson in vacant property risk.
Get a free quote for vacant property or builder's risk coverage and close on your next deal with confidence.
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Have questions about coverage during rehab? Contact us — we specialize in insurance for BRRRR investors.