Insuring Your BRRRR Property: What Coverage Do You Need?

BRRRR method insurance requirements change at each phase of your investment. Understanding what coverage you need—and when to transition between policies—protects your investment and ensures you meet lender requirements.

From builder's risk insurance for flips during renovation to landlord insurance for rental property during the rental phase, this guide covers insurance for real estate investors at every stage. You'll also learn about vacant dwelling policy options and refinance insurance requirements that lenders demand.

Phase 1: Protecting Your Investment During the 'Buy' & 'Rehab' Stages

The acquisition and renovation phases present unique risks that require specialized coverage beyond standard homeowner's insurance.

Vacant Dwelling Coverage

A vacant dwelling policy covers properties that are unoccupied—the typical state of a BRRRR property at acquisition:

What Vacant Dwelling Policies Cover

• Property damage from fire, wind, hail
• Vandalism and theft (with limitations)
• Liability for injuries on the property
• Water damage from burst pipes

Key Considerations

• Vacancy Definition: Typically unoccupied for 30-60+ days
• Higher Premiums: Vacant properties cost more to insure
• Coverage Limitations: Some perils excluded or limited
• Regular Inspections: Some carriers require periodic visits

Typical Costs

• Single-family: $1,000-3,000 annually
• Multi-family: $2,000-5,000+ annually
• Varies by location, condition, coverage limits

Builder's Risk Insurance

Builder's risk insurance for flips and BRRRR renovations covers property under construction or renovation:

What Builder's Risk Covers

• Existing structure during renovation
• Materials and supplies on site
• Work in progress
• Theft of construction materials
• Vandalism during construction
• Weather damage to exposed areas

Key Policy Features

• Coverage Amount: Based on completed value (ARV)
• Term: 3, 6, or 12-month policies common
• Deductibles: Typically $1,000-5,000
• Named Insured: Include yourself, contractors, lender

What's Typically Excluded

• Faulty workmanship or design
• Employee theft
• Earthquake (separate coverage)
• Flood (separate coverage)
• Mechanical breakdown

General Liability During Renovation

Even with builder's risk, you need liability protection:

Your Liability Coverage

• Injuries to visitors or neighbors
• Property damage to adjacent properties
• $1 million minimum recommended
• May be included in builder's risk or separate

Contractor Insurance Requirements

• General Liability: $1 million minimum
• Workers' Compensation: Required in Illinois
• Auto Insurance: For vehicles used on project
• Bonding: Optional but provides additional protection

Always obtain certificates of insurance from contractors before work begins. You should be listed as additional insured.

Lender Requirements During Rehab

Hard money and bridge lenders require specific coverage:

• Coverage amount equal to or greater than loan amount
• Lender named as loss payee/mortgagee
• Proof of insurance before closing
• Immediate notification if policy lapses

Phase 2: Transitioning to Landlord Insurance for the 'Rent' Phase

Once renovation is complete and you place a tenant, you need landlord insurance for rental property—also called dwelling fire or rental property insurance.

Landlord Insurance Basics

What Landlord Policies Cover

• Dwelling Coverage: Structure damage from covered perils
• Other Structures: Garages, fences, sheds
• Liability: Injuries on property, lawsuits
• Loss of Rent: Income during repairs after covered loss
• Personal Property: Landlord's items (appliances, tools)

What's Not Covered

• Tenant's personal belongings (renter's insurance)
• Flood damage (separate policy)
• Earthquake (separate policy)
• Normal wear and tear
• Pest damage
• Intentional damage by owner

Coverage Amounts to Consider

Dwelling Coverage

• Should equal replacement cost (not market value)
• Replacement cost vs. actual cash value policies
• Guaranteed replacement cost for best protection
• Review annually and after improvements

Liability Limits

• Minimum: $300,000 per occurrence
• Recommended: $500,000-1,000,000
• Best Practice: Umbrella policy for additional coverage

Loss of Rent Coverage

• Typically 12 months of rent
• Covers lost income during covered repairs
• May have waiting period
• Review limits match actual rent

Types of Landlord Policies

DP-1 (Basic Form)

• Named perils only (fire, lightning, etc.)
• Actual cash value payouts
• Lowest cost, least coverage
• Not recommended for most investors

DP-2 (Broad Form)

• More perils covered
• Replacement cost on dwelling
• Actual cash value on contents
• Good middle-ground option

DP-3 (Special Form)

• Open perils on dwelling (covers everything not excluded)
• Replacement cost coverage
• Best protection available
• Recommended for most BRRRR properties

Timing the Transition

Switch from builder's risk/vacant dwelling to landlord insurance when:

• Renovation is complete
• Certificate of occupancy obtained (if required)
• Before tenant takes occupancy
• Allow 1-2 weeks for policy processing

Phase 3: Meeting Lender Requirements for the 'Refinance' Step

Understanding refinance insurance requirements ensures your cash-out refinance proceeds smoothly.

Standard Lender Requirements

Coverage Minimums

• Dwelling coverage equal to or greater than loan amount
• Or 100% replacement cost (whichever applies)
• Some lenders require full replacement cost regardless

Policy Requirements

• Lender listed as mortgagee/loss payee
• Specific mortgagee clause language
• Policy effective date before closing
• Paid in full or escrow arrangement

Documentation Needed

• Evidence of Insurance (EOI) or declarations page
• Shows coverage amounts, policy period
• Lists mortgagee correctly
• Agent contact information

Special Coverage That May Be Required

Flood Insurance

Required if property is in FEMA-designated flood zone:

• Zones A, AE, V, VE typically require flood insurance
• NFIP or private flood insurance
• Coverage must equal lesser of loan amount or maximum available
• Can significantly impact cash flow

Wind/Hurricane Coverage

• Some areas exclude wind from standard policies
• Separate wind policy may be required
• Common in coastal and some Midwest areas

Sewer/Water Backup

• Not always included in standard policies
• Important for basement properties
• Relatively inexpensive endorsement

Insurance and Appraisal Coordination

Ensure your insurance supports your refinance goals:

• Coverage based on replacement cost supports higher appraisal
• Recent improvements should be reflected in coverage
• Insurance reconstruction estimate can support value
• Document any special features or upgrades

Bulletproof Your Portfolio: Advanced Coverage for the 'Repeat' Investor

As you scale your BRRRR portfolio, insurance for real estate investors becomes more complex and opportunities for savings emerge.

Umbrella Insurance

An umbrella policy provides additional liability coverage above your individual property policies:

Why You Need Umbrella Coverage

• Single lawsuit can exceed individual policy limits
• Covers gaps between policies
• Relatively inexpensive for coverage provided
• Protects personal assets beyond properties

Recommended Umbrella Limits

• 1-3 Properties: $1-2 million
• 4-10 Properties: $2-5 million
• 10+ Properties: $5-10 million or more

Coordination Requirements

• Underlying policies must meet minimum limits
• Often requires bundling with same carrier
• All properties should be disclosed

Portfolio/Blanket Policies

For investors with multiple properties, blanket policies offer advantages:

Benefits of Blanket Coverage

• Single policy covering multiple properties
• Often lower total premiums
• Simplified administration
• Shared limits can benefit if one property has major loss
• Easier to add new properties

When Blanket Makes Sense

• 5+ similar properties
• Properties in same geographic area
• Similar values and risk profiles
• Volume justifies portfolio underwriting

Specialized Coverages to Consider

Rent Guarantee Insurance

• Covers lost rent if tenant defaults
• Typically covers 6-12 months
• May include eviction cost coverage
• Growing in popularity

Equipment Breakdown

• Covers mechanical/electrical failure
• HVAC, water heaters, appliances
• Not covered by standard policies
• Valuable for older properties

Cyber Liability

• Protects if tenant data is breached
• Increasingly important with online management
• Covers notification and remediation costs

Working with Insurance Professionals

Finding the Right Agent

• Specialize in investment property
• Understand BRRRR strategy
• Access to multiple carriers
• Experience with portfolio coverage

Annual Insurance Review

• Review all coverages annually
• Update for new properties and improvements
• Shop for competitive rates
• Ensure coverage matches current values

Cost Management Strategies

Premium Reduction Tactics

• Higher deductibles (if reserves support)
• Multi-policy discounts
• Security system discounts
• Claims-free history
• Professional management

What Not to Cut

• Liability limits (your greatest exposure)
• Replacement cost coverage
• Loss of rent protection
• Required lender coverages