<\/span>Why is finding a policy for a home in need of repairs so difficult?<\/span><\/h2>\n\n\n\n

Insurance tends to be an overlooked part of the home-buying process. Mortgage lenders typically require the home buyer to purchase some form of homeowners insurance in order to obtain the mortgage, but it usually ends up being a normal part of the process that the homeowner doesn\u2019t think too much about. <\/p>\n\n\n\n

Fixer-upper homes can be more of a challenge to obtain insurance coverage for. Why is that? Well, homes in need of major repairs, ones that have been abandoned, or have been foreclosed on usually lead to a higher risk to the insurance provider. Not only is there more risk that peril can cause damage to the home when no one is actually living in the home, but there is also more risk that damage can be caused by renovations<\/a> of the home as well. This higher risk leads to some insurance companies charging higher premium rates to the homeowner or some insurance companies not even offering any sort of coverage to the homeowner. Luckily a homeowner still has some options in this situation.<\/p>\n\n\n\n

<\/span>What insurance options are available for a fixer-upper home?<\/span><\/h2>\n\n\n\n

What insurance options are available to the homeowner depends on the state of the home. You will need an inspection anyways to get a mortgage loan on the home, so that inspection can be used to determine what condition the home is in and what insurance options may be available to you. <\/p>\n\n\n\n

There are five options that may be available to the owner of a fixer-upper home:<\/p>\n\n\n\n

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1. Conventional insurance:<\/strong> The traditional insurance route may be available to the homeowner when only minor repairs are needed and the home can be moved into shortly after closing (typically within 30 days). Depending on the extent of the repairs or if more significant repairs may need to be completed after move-in, the insurance provider may charge a higher premium rate or send the policy out to be reinsured by a third-party insurer that takes on higher-risk homes.<\/li>\n\n\n\n
2. Builder\u2019s risk<\/a>:<\/strong> This is the most common form of home insurance available to the owner of a fixer-upper home or a home that is being built. Typically builder\u2019s risk form of coverage works by starting at a lower amount of coverage and lower premium rate and then progressively becoming more expensive and providing more coverage as the home becomes worth more over time as renovations are completed or the home is built. This option is usually most available to those homeowners who have a solid timeline and plan for completing construction or renovations.<\/li>\n\n\n\n
3. Vacant dwelling<\/a>:<\/strong> This option is typically available to homes that need some repairs (usually more cosmetic repairs) and the home will not be occupied during the repairs. This form of Home insurance will cover the home for many causes of damage to the home, but will not cover the home for perils such as theft as vacant dwellings are far more likely to have theft occur.<\/li>\n\n\n\n
4. HO-8 policy<\/a>:<\/strong> This is a good option for homes that are older and that will be occupied by the homeowner even while repairs may be occurring. Older homes are more prone to many forms of risk and repairs could potentially be more costly than what the home is actually worth. Coverage under HO-8 is far less than under an HO-2 or HO-3 policy, but is a suitable choice for an older home.<\/li>\n\n\n\n
5. FAIR plan:<\/strong> Some situations may result in essentially no insurance options being available to the homeowner. This can sometimes be the case especially when the homeowner is doing all the repairs themselves or is paying someone in cash to complete renovations. Insurance companies don\u2019t particularly like this type of situation and may not offer any coverage option to the homeowner. In that case, the homeowner\u2019s best and probably only option is to turn to their state\u2019s FAIR (Fair Access to Insurance Requirements) Plan. These plans are offered in most states. The plans vary from state to state and provide very basic insurance, but they can be a better option to the homeowner than nothing at all.<\/li>\n<\/ol>\n\n\n\n

   Typically, all of the above options are more expensive than standard home insurance and potentially less encompassing in their coverage but are usually better than nothing.<\/p>\n\n\n

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   Homeowners Insurance Cost Calculator<\/div>\n\n<\/div><\/div>\n\n

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