How to Manage Rising Hazard Insurance Costs on Fix and Flip Investment Properties

Hazard insurance used to be a line item most flippers didn’t think twice about. A couple hundred bucks. Maybe a thousand if the property was in a sketchy zip code or in a state with hurricane history. That’s changed. Fast.

Now, hazard insurance is one of the biggest threats to your bottom line in a fix and flip deal - especially if you’re working in states like Florida, California, or Texas. But even outside those high-risk zones, premiums are climbing. Why? Carriers are pulling out of key markets. Policies are harder to get. And lenders require coverage before funding closes. No policy, no loan.

That’s the bad news.

The good news is that if you’re smart and prepared, you can keep costs in check - or at least plan for them accurately so they don’t kill your ROI.

Let’s walk through how.

Why Hazard Insurance Matters in Fix and Flip Deals

You need hazard insurance to close your loan. Period. No insurance, no funding.

Hard money lenders - and even some bridge loan providers - require proof of coverage before releasing funds. That means you have to lock in a policy early. And if your premiums are double what you expected, that cost eats into your project budget fast.

You also can’t go without it. A fire, flood, or storm during renovations can wipe out your investment. And if your lender discovers you let coverage lapse? They can force-place a policy - usually at a much higher rate than what you’d get on your own.

Why Costs Are Rising

Most investors expect material costs to fluctuate. Same with labor. But insurance? That used to be a steady, predictable number. Not anymore. In the last few years, hazard insurance premiums have spiked - sometimes doubling or tripling on the same type of property in the same market.

And it's not just happening in places prone to wildfires, floods, or hurricanes. Even lower-risk markets are seeing rate hikes, policy cancellations, and stricter underwriting rules. Insurers are becoming more selective. Some are exiting entire states. Others are pricing policies so high that many flippers can’t justify the cost.

If you’re not actively watching this part of your deal budget, you’re leaving yourself open to massive financial risk. Insurance is no longer just a checkbox for closing - it’s a potential deal killer if you’re not prepared.

So what’s behind the surge in cost?

Two main factors:

• Carrier exits – Big insurance companies are pulling out of risky markets, especially ones prone to wildfires, hurricanes, or rising crime.

• Underwriting changes – Even when insurers stay, they’re tightening requirements. Older homes with outdated wiring, no roof upgrades, or long vacancy periods are getting denied - or priced sky-high.

If you're flipping older or distressed homes, you're getting hit the hardest.

What an Investor Can Do About Hazard Insurance for a Flip

Hazard insurance is no longer something you can treat as an afterthought. The old approach - lock up the deal, then scramble to find a policy before closing - is how investors end up overpaying, getting stuck with bad coverage, or losing financing altogether.

You need to factor insurance into your acquisition process from day one. Before you make an offer. Before you run the numbers. Because if the property is in a high-risk area, has red flags like old wiring or roof damage, or sits vacant for too long, your premiums could explode - or worse, you could be denied coverage entirely.

A smart investor builds an insurance strategy the same way they build a renovation scope or financing plan. It’s just part of the job now.

Here’s how to stay ahead of the insurance problem - and protect your profits.

1. Get Quotes Early - Really Early

Don’t wait until you're in escrow to look for insurance. Start getting quotes as soon as the property is under contract - or even before.

• Talk to a broker who works with flippers, not just regular homeowners.

• Ask about coverage options specific to vacant properties or renovations.

• Make sure you understand if the policy covers fire, vandalism, theft, liability, and weather events during construction.

2. Use the Right Type of Insurance

Fix and flip properties need more than standard homeowners’ coverage. You’re usually looking at one of these:

• Builder’s Risk Insurance – Covers materials, tools, and structures during renovation. Often required if you’re doing structural work.

• Vacant Home Insurance – Designed for properties that are unoccupied. Necessary if the home is sitting empty for more than 30 days.

• Dwelling Fire Policy – Offers more limited coverage than homeowners’ policies, but is more affordable and often a good fit for short-term flips.

Pick the one that matches your project timeline and risk.

3. Choose Renovation-Friendly Locations

This one is about long-term strategy.

• Avoid areas where insurers are fleeing.

• Stick to zip codes where replacement cost coverage is still available and affordable.

• Look at crime rates, flood zones, wildfire maps, and storm history when deciding where to flip.

A great deal in a high-risk area can be a trap if insurance premiums kill the margin.

4. Upgrade for Better Premiums

You’re already planning renovations. Be strategic about which upgrades help reduce your premium.

• Replace the roof - new roofs reduce storm risk.

• Upgrade wiring - outdated electrical is a big red flag.

• Install security systems - deterrents can lower vandalism and theft risk.

Ask your broker what improvements can knock down premiums. Do those first.

What Happens If a Real Estate Investor Doesn't Get Insurance

Skipping over hazard insurance or brushing it off as a minor detail is one of the fastest ways to derail a flip. It might not seem urgent when you're focused on finding a deal, lining up financing, or locking down a contractor - but it becomes very urgent the moment your lender asks for a binder or a storm damages your roof mid-renovation.

Underestimating insurance costs - or worse, not securing the right kind of policy - can blow up your timeline, kill your loan, or wipe out your profit margin. It's not just a budgeting mistake. It’s a risk multiplier.

And unlike material delays or overbudget labor, insurance problems are often harder to fix once the project is already in motion.

Here’s what can happen if you get this part wrong:

• Loan denial or delay – Your lender won’t close without a binder in place.

• Force-placed coverage – Lenders will tack on their own insurance, often double or triple what you’d pay.

• Out-of-pocket losses – Fire, theft, or weather damage with no coverage? That’s on you.

• Profit erosion – Every dollar spent on unexpected insurance eats into your flip profit.

Insurance might not be glamorous, but it’s critical.

How to Budget for Hazard Insurance in a Flip Deal

Hazard insurance isn’t a “nice to have.” It’s required to close your loan, and it protects you from catastrophic loss during renovations. But too many flippers treat it like an afterthought - something to figure out once the rest of the numbers are locked in. That’s a mistake.

Insurance premiums aren’t flat or predictable anymore. They vary wildly depending on the property's location, age, condition, and even how long it will sit vacant. And if you're flipping multiple properties at the same time, these costs can pile up fast - turning a solid deal into a money-loser if you didn't account for them upfront.

You don’t need to be an insurance expert. But you do need to start thinking like one when you underwrite a deal.

Here’s how to approach hazard insurance as part of your budget from day one:

• Ask local brokers for comps – They can tell you what similar flips are paying.

• Use a buffer – Add 15-20% above your estimate to account for mid-renovation policy changes or surprises.

• Review your lender’s insurance requirements – Make sure you’re not underinsured or overinsured.

Bonus: How to Fund Your Flip in a Rising-Cost Environment

Insurance costs are going up. So are materials. So is labor. If you’re still trying to use bank loans or traditional financing, you’re probably too slow - and not flexible enough.

This is where fix and flip loans from hard money lenders like BRRRR Loans come in.

They’re built for speed and simplicity:

• No tax returns or income verification

• Funding based on ARV (after-repair value), not just purchase price

• Quick approvals - often in days, not weeks

• Funds released in phases to match renovation progress

If you’ve got a solid Scope of Work and realistic comps, this type of financing helps you stay nimble in a market where delays and surprise costs are the norm.

And they’re used to hazard insurance challenges - many work with brokers who specialize in flip-friendly coverage.

Wrap-Up: Smart Investors Treat Insurance Like a Deal-Killer

Because it is. If you don’t price it right, plan for it early, and buy the right kind of policy, your deal can fall apart - fast.

Treat insurance like you treat materials, permits, and resale value. It’s a core part of the budget, not an afterthought.

When in doubt, pick up the phone. Talk to your lender, your insurance broker, and your contractor. Ask dumb questions early so you don’t face expensive problems later.

Questions About Hazard Insurance or Fix & Flip Financing?

Hazard insurance can feel like a moving target - but you don’t have to figure it out alone. BRRRR Loans specializes in fix & flip financing and works with real estate investors navigating rising insurance costs every day. We know what lenders need. We know what investors face. And we can help you get it done fast.

Explore Fix & Flip Loan Options

Got questions? Call the Real Estate Investment Help Line at 732-851-6900.

You’ll talk to someone who actually understands flip deals, insurance headaches, and hard money timelines - not someone reading from a script.

No pressure. Just real answers.

________________________________________

FAQ: Hazard Insurance for Fix & Flip Investors

Q: Can I use homeowners insurance for a fix and flip property?

No. Standard homeowners policies typically don’t cover vacant or under-renovation homes. You’ll need builder’s risk, vacant property, or dwelling fire coverage.

Q: When do I need to buy hazard insurance during the flip process?

Before closing. Your lender will require proof of coverage before releasing funds.

Q: What happens if I let my hazard insurance lapse?

The lender may force-place a policy at your expense. These are often more expensive and offer worse coverage.

Q: How can I reduce the premium on the insurance on my investment home?

Upgrade high-risk components like roofs and electrical systems. Install security. Choose a lower-risk location.

Q: Do hard money lenders help with insurance setup?

Some do. Lenders like BRRRR Loans often work with insurance partners who understand flippers’ needs and can quote quickly.

‍

‍