Flipping houses can be a smart way to earn money, but it comes with risks. Without the right insurance, one mistake—like a fire, theft, or lawsuit—could erase your profits or even leave you in debt. Flip insurance (sometimes called builder’s risk insurance) is designed to protect your investment while you renovate a property. In 2025, with rising climate risks, bigger lawsuits, and new rules, getting the right coverage is more important than ever.
In this guide, we’ll walk you through the top 5 flip insurance mistakes that could cost you thousands. We’ve used the latest 2025 industry data and real-world examples to show you what can go wrong—and how to fix it. Whether you’re new to flipping or a pro, these tips will help you avoid trouble. Let’s get started!
What Is Flip Insurance?
Flip insurance is a special type of coverage for people who buy, fix up, and sell houses. It’s different from homeowners insurance because it protects vacant properties during renovation. It covers things like:
- Damage from fire, storms, or vandalism.
- Theft of tools or materials left on-site.
- Injuries to workers or visitors on the property.
With flip projects, risks are high, and regular insurance won’t cut it. Let’s look at the five biggest mistakes flippers make and how to steer clear of them.
Top 5 Mistakes and How to Avoid Them
Mistake 1: Assuming Homeowners Insurance Is Enough
Many first-time flippers think their homeowners insurance will cover their project. That’s a costly mistake. Homeowners insurance is for people living in a house, not for empty homes being renovated.
Why It’s a Problem:
- No Coverage for Renovation Risks: It doesn’t protect against vandalism, stolen materials, or contractor mistakes.
- Claims Denied: The National Association of Insurance Commissioners (NAIC) says using the wrong insurance can lead to rejected claims and even legal trouble.
2025 Data Snapshot:
Here’s how homeowners insurance stacks up against flip insurance:
| Issue | Homeowners Insurance | Flip Insurance |
|---|---|---|
| Vacant Property Coverage | No | Yes |
| Contractor Liability | Limited | Full |
| Material Theft | Excluded | Covered |
Source: Deloitte 2025 Global Insurance Report
How to Avoid It:
- Get a flip insurance policy tailored for renovations.
- Companies like Obie Insurance offer plans that cover materials, liability, and more.
Mistake 2: Underestimating Liability Risks
Liability claims—when someone gets hurt and sues you—are a growing threat in 2025. Experts call it “social inflation” because lawsuits and payouts are getting bigger.
Key Stats:
- In 2024, 42% of commercial property claims were about liability.
- The average lawsuit payout hit $250,000 last year.
Real-World Example:
A flipper in Florida faced a $175,000 lawsuit after a subcontractor fell off a ladder. Their basic policy only covered $50,000, so they had to pay the rest themselves.
How to Avoid It:
- Make sure your flip insurance has general liability coverage of at least $1 million.
- Check that your contractors have their own insurance before they start work.
Mistake 3: Ignoring Climate-Related Risks
Climate change is making insurance trickier in 2025. Natural disasters like floods and wildfires are more common, and only 35% of the $357 billion in global losses from 2023 were insured. For flippers, this means higher costs and tougher rules, especially in places like California or Florida.
What’s New in 2025:
- Stricter Rules: Insurers now have to tell you about climate risks, like flood or wildfire zones.
- Higher Premiums: Rates in risky states jumped 12% in 2024.
How to Avoid It:
- Check your property with FEMA’s flood maps or Obie Insurance’s risk tools.
- Add extra coverage for natural disasters to your policy.
Mistake 4: Overlooking Contractor Insurance Gaps
If your contractor doesn’t have good insurance, their mistakes can cost you big. For example, if bad wiring sparks a fire, you might have to pay for the damage.
2025 Claim Trends:
- 31% of contractor claims are from accidents that damage property.
- 24% involve auto or trailer problems.
- 12% are about theft.
How to Avoid It:
- Ask contractors for proof of workers’ compensation and auto insurance.
- Add subcontractor coverage to your flip insurance for extra protection.
Mistake 5: Failing to Update Policies Mid-Project
Renovation projects often take longer than expected. If your flip insurance runs out before you’re done, you’re on your own if something goes wrong.
Case Study:
A Texas flipper’s policy expired during a three-month delay. When a pipe burst and caused $80,000 in damage, they had to cover it all out of pocket.
How to Avoid It:
- Pick a flexible policy with adjustable terms—Obie Insurance offers 6-12 month options.
- Set a reminder to renew your coverage if your project drags on.
How to Choose the Right Flip Insurance in 2025
Getting the best flip insurance doesn’t have to be hard. Here’s what to do:
- Find a Specialist: Work with providers like Obie Insurance that know flipping inside and out.
- Look for Flexibility: Choose a policy you can tweak as your project changes.
- Cover All Risks: Make sure it includes theft, liability, and disaster protection. Add-ons like vandalism coverage can help too.
- Shop Around: Use the NAIC’s Consumer Portal to compare providers and prices.
- Ask Questions: Read your policy and clarify anything you don’t understand.
Conclusion
Flipping houses is exciting, but without the right flip insurance, it’s a gamble. By avoiding these five mistakes, you can protect your money and keep your project on track. In 2025, with bigger risks and higher stakes, smart coverage is a must.
Ready to get started? Check out Obie Insurance for plans built for flippers. Don’t let a simple mistake cost you thousands—get the right insurance today and flip with confidence!