Foreclosure Cleanup Business: Why You Need Insurance & In-depth Advice on What Type to Get

 

If you’re thinking about starting a foreclosure clean up business, you absolutely need insurance. There’s no getting around this. But, what type to get is what stumps most people. We’ve answered this question on this blog before, but it keeps cropping up. It’s one of the most frequently asked questions we receive.

 

 

For example, recently, I received this email:

 

I bought your E-Book on how to start a foreclosure clean up business.  So far it has been very informative and I would like to thank you for taking the time to write this information for those that are seeking to join the business.

I have a question about [foreclosure cleaning] insurance that I hope you can assist me with.  I was looking at HUD contracts and other contracts that require you to have worker’s comp insurance.  However, I have been unable to find an insurance company that will cover me for worker’s comp b/c they say it is too high. 

 

Am I going about getting the insurance wrong or asking for the wrong thing?  IS there a minimum amount of insurance that I should start out with before trying to get the worker’s comp?  Any information that you can provide to me will be greatly appreciated. 

 

So, here’s a definitive answer as to why you need insurance for your foreclosure cleaning business – and advice on what types to get.

 

Foreclosure Cleanup: Why You Need Insurance

 

The quick answer is, it will be hard for you to get work without insurance (and a business license). To explain in more detail, most of your work will come from real estate agents, banks, hard-money lenders, mortgage brokers, large property preservation companies, etc.

 

In short, your work is going to come from professionals with a lot to lose if something goes awry on the job.

 

Many of them won’t even consider you for a foreclosure cleaning job if your company doesn’t have insurance. Because many of these are licensed and insured professionals, they not only have little patience for those who aren’t, they think of you as unprofessional if you don’t have business insurance.

 

And, not to mention, a lot of your competition WILL have insurance.

 

And don’t think you can skirt the issue because one of the first things a prospect will ask you for before hiring you for a job is proof of insurance (and business license). The way it works is, when a realtor or banker asks for proof of license and insurance, what they’re doing is submitting this paperwork along with your bid. You’re likely not the only one vying for a job, so you don’t even get to get your foot in the door without insurance.

 

Who would you hire for a foreclosure cleaning job if you had a choice – a licensed and insured professional, or a “man with a van” type operation with no insurance?

 

Now that you know why you need insurance for your foreclosure cleanup business, let’s look at the factors that determine the type you’re going to need. 

 

Foreclosure Cleanup: 5 Factors that Determine the Types of Insurance Needed

 

The type of insurance you will need for your foreclosure clean up business will depend mainly on the following five factors:

(i) the types of services your business offers/will offer;

 

(ii) the laws in your jurisdiction (the vary from state to state and even from city to city);

 

(iii) whether or not you have/will have employees;

 

(iv) whether or not you will be bidding on contracts, and the nature of the contracts upon which you will be bidding; and

 

(v) the type of business your foreclosure cleaning company is classified as.

 

Now that you know the determining factors, here’s an overview of the types of insurance you will need.

 

Foreclosure Cleanup: Overview of Types of Insurance Needed

 

Liability Insurance: This includes coverage for, for example, your business equipment and your vehicle (if it’s used for the business).

 

Workman’s Comp: You need this insurance only if you have employees. If you want to bid on contracts, like the reader who sent in this question, then you may want to pick it up even if you have no employees.

 

Workmen’s comp insurance is not cheap, but is not outrageously expensive either – and if you plan to bid on any type of government contracts (federal, state or local) it’s almost always going to be a requirement.

 

The Best Way to Get the Type of Insurance You need for Your Foreclosure Cleaning Business

 

Figure Out Your Service Offerings:  The first thing you need to do is figure out which types of services you’re going to offer, for this goes a long way in determining how your business will be classified and which type of coverage you need.

 

If your business is classified as a janitorial service, for example, you may need one type of insurance in your jurisdiction. If it’s classified as a general contracting firm, you may need another type of insurance.

 

Tip: Don’t offer services you can’t afford to be covered for. So, if you have to start with just trashouts and simple lawn maintenance, start there. You can always upgrade once you start making money.

 

Consult Several Insurance Agents: Believe it or not, some of them won’t know how to classify your business. Most people like for things to fit neatly into a little box and if it doesn’t and they can’t find the right box to check on their little form, they’re lost.

 

So, interview a few insurance agents. Tell them – in painstaking detail — the type of business you’re planning to set up and the services you’ll be offering; and whether or not you’ll have employees. You may be surprised at all the various answers you’ll get – and the different costs in coverage. But, make sure you’re adequately covered for the services you’ll be offering.

 

Learn more about what types of coverage and how much of each you’ll need in this detailed booklet on foreclosure cleanup business insurance.

  

Related Posts

 

Foreclosure Clean Up Insurance: All the Info You Need to Know About This

 

Want to Start a Foreclosure Cleaning Business? Advice on Type of Insurance You Need