Standard homeowners insurance won't cover a house you're flipping. This isn't a technicality buried in the fine print. It's a fundamental gap that catches new investors off guard and occasionally trips up experienced ones who assume their existing policy covers everything they own.
When you buy a property to renovate and resell, the risks are genuinely different from an owner-occupied home. You have a vacant structure, active construction, subcontractors on site, and a building that may not qualify for any standard carrier until work is complete. Each phase of a flip carries different coverage needs, and the gaps between those phases are where expensive surprises happen.
Why standard homeowners insurance won't work
A standard HO-3 homeowners policy is underwritten for owner-occupied residences. Several things about a flip property disqualify it:
- Vacancy. Most standard policies reduce or void coverage after 30 to 60 days without an occupant.
- Active renovation. Open walls, removed systems, and ongoing construction fall outside what a standard homeowners policy covers.
- Non-primary residence. Insurers write standard personal lines for the place you live, not investment properties.
- Commercial activity. Buying, improving, and reselling property for profit is a business operation. Personal lines policies aren't designed for it.
If something goes wrong during a flip and you're relying on a standard homeowners policy, expect the claim to be denied. The carrier's underwriting guidelines almost certainly exclude the combination of vacancy, renovation, and investment use that defines a flip.
Builder's risk insurance
Builder's risk is the primary coverage type for a property under active renovation. It covers the structure, materials staged on site, and sometimes installed equipment against fire, lightning, hail, windstorm, vandalism, and theft while construction is underway.
In Texas, builder's risk policies standard include wind and hail coverage, which is especially relevant in Lubbock and West Texas where hailstorms are a recurring spring hazard. Lenders funding construction or renovation loans almost always require proof of builder's risk before releasing funds, listing themselves as a loss payee.
Builder's risk costs typically run 1% to 5% of total project value depending on the construction type, location, policy term, and carrier. On a $150,000 renovation in Lubbock, that's $1,500 to $7,500 for the duration of the project. Rates vary meaningfully between carriers, so comparing quotes is worth the time.
Builder's risk ends when the renovation is complete. Once the work is done and the property is sitting vacant waiting for a buyer, a coverage gap opens. That gap requires a separate policy type.
What builder's risk does not cover
The exclusions matter as much as the coverage.
- Contractor tools and equipment. Those require inland marine or contractor's equipment coverage.
- Worker injuries. Those require workers' compensation from the contractor, or occupational accident coverage for independent contractors.
- Liability claims. If someone is injured on the site or you cause damage to a neighboring property, that requires a separate general liability policy.
- Flood damage. Excluded from nearly all builder's risk policies. Requires separate flood coverage.
- Completed sections of the project unrelated to the covered event.
Most experienced flippers carry at least builder's risk and general liability simultaneously during active renovation. Together they address the two most financially catastrophic scenarios: a major property event and a liability claim from an injury on site.
Liability coverage needs
General liability for house flippers typically provides $1,000,000 per occurrence and $2,000,000 aggregate. It covers bodily injury claims from anyone on the property, damage to neighboring structures caused by your operations, and legal defense costs.
In West Texas, renovation sites frequently have foot traffic from contractors, inspectors, and prospective buyers, and properties in some Lubbock neighborhoods may be targets for trespassing. If a contractor without their own workers' comp is injured on your site, you may face a liability claim. Requiring every contractor to carry their own general liability and workers' comp before accessing the property is standard practice, but it doesn't eliminate your exposure entirely.
Vacant property insurance
When the renovation is done but the property hasn't closed yet, builder's risk expires and a new exposure begins. An empty home is more vulnerable than an occupied one: vandalism, weather events, undetected water leaks from idle plumbing, and break-ins all happen at higher rates in vacant structures.
Vacant property insurance covers fire, vandalism, and weather damage to an unoccupied property. It typically excludes liability (which stays on your general liability policy) and usually requires regular property checks to keep coverage active. Premiums are higher than equivalent occupied home coverage, reflecting the elevated risk. Budget for this in your carrying costs.
Cost factors and getting the right policy
Insurance costs for a flip in West Texas depend on the property value and project scope, the location and its specific risk factors (flood zone, crime rate, hail exposure), the construction type, and the policy term. Longer builder's risk terms cover delays but cost more. Older homes with outdated plumbing or electrical systems typically price higher than newer construction.
LSM Insurance Agency works with investors across Lubbock and West Texas to find coverage for each phase of a flip. We compare rates from multiple carriers for builder's risk, general liability, and vacant property insurance. For a free review of your
home insurance and investment property coverage needs, call (806) 577-4198 or visit lsm-agency.com. Getting it right before you start is far cheaper than discovering a coverage gap after a loss.
