The Importance of Insurance

The Importance of Insurance

3 Ways To Insure A Fixer-Upper

Katrina Terry

If you love a good home improvement project and want to save some money on buying a house, then a handyman special might be the perfect choice for you. The beauty of a fixer upper is you can really make it your own while you're putting the work in to make the place livable. But buying a house that needs a lot of work is not without it's drawbacks. One of the major issues with your fixer upper is it will be more difficult to insure than a finished house.

Once the home has been inspected and you know what needs to be done to make it livable, you'll need to call homeowner's insurance companies to see if your home qualifies for conventional insurance. If it doesn't, ask your insurance agent about these homeowner's insurance options for fixer uppers. You can learn more below.

Builder's Risk

Builder's risk plans are commonly purchased by homeowners who are building new homes from the ground up, but they can also be used when your new home needs major renovations. They protect the materials, fixtures, and equipment being used during the renovation process. To qualify for builder's risk insurance, you'll need a clear idea of what needs to be done to renovate the home. The insurance company may ask for a construction schedule and periodic updates on the progress of the renovation.

The good news about builder's risk insurance is it generally starts out at a lower cost than other types of insurances, because your home isn't worth as much at the start of the renovation as it will be later. With this type of insurance, you'll see your premiums rise as more and more of the work is completed and the property increases in value.


If you'll be able to live in the home while you're fixing it up, you may be able to use HO-8 insurance. This type of insurance is intended to provide insurance for older homes that would be difficult to replace. Unlike conventional insurance, HO-8 insurance doesn't cover all possible types of damage to your home, only a strict set of named perils. For example, fire damage, vandalism, and theft are covered, but water damage and damage from falling objects are not covered.

HO-8 insurance is also different from conventional insurance in that it won't provide you with the full replacement value of your home if your home happens to be destroyed. It would only provide you with the actual cash value of your home. Actual cash value is calculated by determining the replacement value and subtracting the depreciation on the home.

Vacant Dwelling

Another possibility is your home may be livable and need only minor cosmetic work, but you and your family don't want to live in it while the work is going on. After all, who wants to spend their first few weeks or months in a new home navigating around construction zones? You may choose to delay the sale of your old home, take a vacation, or stay in a hotel or short-term apartment until your home is completed to your satisfaction.

In this case, your best bet is to inquire about vacant dwelling insurance. Typically, these policies cover most of the same things conventional homeowners insurance covers, with the exception of theft and vandalism. That's because empty homes are at considerably higher risk for theft and vandalism. However, if you're going to check on the home regularly or have someone living in the area do so, or if you'll be there regularly doing the renovations yourself, you may feel it's worth the risk. When the work is completed and you finally move into the new house, you'll be able to end the vacant dwelling policy and purchase a conventional policy instead.

It's easy to panic when you're told you're not eligible for a conventional homeowner's insurance policy, but try to stay calm. Ask your insurance agent to go over all of these options with you so you can find the insurance policy that fits your situation best.


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The Importance of Insurance

When you start thinking about getting insurance, it can be overwhelming to hear the advice from family and friends. While some people might encourage you to stockpile money and insure yourself, others might warn about the expense of paying for car repairs or a stay in the hospital. However, even the most conservative financial experts talk about the importance of having sound insurance. Because it can be difficult to find the right policies, I decided to create a website completely dedicated to providing free information about insurance. Every situation is different, but if you are like most people, you will need a decent homeowners, medical, auto, and life insurance policy to protect you from unforeseen circumstances.