How Does Insurance Work for Modular Homes?
Modular homes provide an affordable alternative to both a manufactured or mobile home and a traditional home built entirely on-site. When it comes to insurance, however, they are typically covered under the same policy as a regular house and are ineligible for mobile home coverage. However, this works in the modular homeowner's favor because regular homeowners insurance is much more affordable than mobile home insurance.
What exactly is a modular home? What distinguishes it from a manufactured or mobile home?
Modular homes are often confused with manufactured homes, but the only thing they have in common is that they are both mostly built in a factory. A manufactured home, also known as a mobile home, is finished in the factory and delivered in one piece, whereas a modular home is shipped in sections and assembled on-site.
A modular home is far more customizable than a manufactured home, and modular homes are very similar to traditional site-built homes. Modular homes are built in accordance with the same building codes as site-built homes, which vary by state and county (though many states use the International Building Code, or IBC, to set the standard).
It's often difficult or impossible to tell if a modular home was built in a factory. A small metal tag or sticker somewhere in the modular home, usually under the kitchen sink, is the only guaranteed identifying mark. Manufactured homes, on the other hand, are governed by the federally controlled HUD building code for manufactured homes.
Differences between modular and manufactured homes
Common characteristics of modular homes | Common characteristics of manufactured homes |
Delivered to the property in multiple pieces | Delivered to the property in one piece |
Typically built on a slab, crawl space or basement | Typically built on a metal frame, sometimes with wheels |
Look like regular homes | Often look boxy or distinctly trailer-like |
Maintains value about on par with a regular home | Depreciates in value over time |
What type of insurance do I need for a modular home?
A standard homeowners insurance policy is required if you live in a modular home. This is the same type of insurance you'd get for a traditionally built home, but it's not the same as the policy for a manufactured home. This is due to the fact that homeowners insurance companies consider modular homes to be the same as traditional site-built homes, with the same homeowners insurance rates.
- State Farm and Farmers, for example, do not even ask whether your home is traditional or modular when you request a homeowners insurance quote.
Homeowners insurance for a typical site-built home is typically less expensive than coverage for a comparable manufactured home, and the same is true for a modular home.
Modular home insurance coverages
The coverages required when purchasing a modular home are the same as those required when purchasing a conventionally built home. There are no special insurance risks for a modular home, but you are not immune to them either.
Coverage options include dwelling, personal property, and liability protection, as well as any add-ons you may require, such as umbrella insurance or extended coverage for valuables like jewelry.
Dwelling coverage: Dwelling coverage pays for repairs to the structure of your modular home if it is damaged. This includes damage to your home's exterior and interior walls, roof, and some internal home systems such as wiring, plumbing, and heating. The most common type of homeowners insurance (HO-3) protects your home against "open perils," with only a few named exclusions, such as war.
Personal property coverage: Personal property coverage pays for the repair or replacement of your own personal property if it is damaged by a covered peril. Personal property coverage typically covers damage or theft regardless of whether the property is in or out of your home. A standard (HO-3) homeowners insurance policy, on the other hand, only covers you if your home is damaged by a specifically named peril, such as fire or wind.
Liability insurance: Liability insurance covers the medical and legal expenses of others. The most common reason for filing a liability claim is if someone is injured on your property, such as by a fall or dog bite. However, you may require it if you are sued for libel, for example.
Additional living expenses: Additional living expenses (ALE) coverage, also known as loss of use coverage, pays for additional expenses incurred if your modular home becomes uninhabitable. For example, ALE coverage would pay for a hotel room if your house burned down until it was repaired and safe to live in again.
Other coverages: Other options for modular homeowners insurance include coverage for a detached structure such as a garage, debris removal, and identity theft protection. The availability of these additional coverages varies by insurer, so you may need to check with multiple companies if you're looking for specific coverage.