How Does Insurance Work for Modular Homes?

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Modular homes are an affordable middle-ground between a manufactured or mobile home and a traditional home built completely on-site. But when it comes to insurance, they’re covered using the same kind of policy as a regular house and aren't eligible for mobile home coverage. This works to a modular homeowner's benefit, however, as rates for regular homeowners insurance are much more affordable than mobile home insurance.

What Is a Modular Home? How Does It Differ from a Manufactured or Mobile Home?

Modular homes are commonly associated with manufactured homes, but the only similarity they share is that they are both mostly built in a factory. But while a manufactured home—also called a mobile home—is completely finished in the factory and delivered in one piece, 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 have much more in common with a traditional site-built home. Modular homes are built to the same building standards as a site-built home, which vary by state and county (though many states use the International Building Code, or IBC, to set the standard).

In many cases, it's difficult or impossible to tell that a modular home was built in a factory. The only guaranteed identifying mark is a small metal tag or sticker somewhere in the modular home, often under the kitchen sink. In contrast, manufactured homes are subject to the federally controlled HUD building code for manufactured homes.

Differences Between a Modular and Manufactured Home

Common Characteristics of Modular HomesCommon Characteristics of Manufactured Homes
Delivered to the property in multiple piecesDelivered to the property in one piece
Typically built on a slab, crawl space or basementTypically built on a metal frame, sometimes with wheels
Look like regular homesOften look boxy or distinctly trailer-like
Maintains value about on par with a regular homeDepreciates in value over time

What Insurance Do I Need for a Modular Home?

If you live in a modular home, you'll need a standard homeowners insurance policy. This is the same form of insurance you'd get if your home were a traditionally built home and different from the type of policy for a manufactured home. This is because homeowners insurance companies consider modular homes the same as a traditional site-built home, with homeowners insurance rates to match. For example, State Farm and Farmers don't even ask if your house is a traditional home or modular during the process of getting a homeowners insurance quote.

Homeowners insurance for a typical site-built house is usually cheaper than coverage for a comparable manufactured home, and that holds true for a modular house as well.

Modular Home Insurance Coverages

The coverages needed for someone buying a modular home are the same as the coverages you'd need when buying a conventionally built home: There aren't any special insurance risks for a modular home, but you aren't exempt from anything, either. Coverages available include dwelling, personal property and liability protection, plus any add-ons that you might need, such as umbrella protection or extended coverage for valuables like jewelry.

Dwelling Coverage: Dwelling coverage pays for repair to the structure of your modular home if it's damaged. This includes damage to the exterior and interior walls of your home, your roof and some internal home systems, like wiring, plumbing and heat. In the most common type of homeowners insurance (HO-3), your dwelling is protected against "open perils," which is only subject to a few named exclusions, like war.

Personal Property Coverage: Personal property coverage pays for repair or replacement of your own personal property if it's damaged by a covered peril. Personal property coverage typically covers damage or theft whether the property is in your home or out of it. However, for a standard (HO-3) homeowners insurance policy, you're only covered if it is damaged due to a specifically named peril, like fire or wind.

Liability Protection: Liability protection covers medical and legal expenses for other people. The most common scenario under which you'd make a liability claim is if someone is injured on your property, such as from a fall or dog bite. But you might also need it if someone sues you for libel, for example.

Additional Living Expenses: Additional living expenses (ALE) coverage, also called loss of use coverage, pays for extra expenses you incur if your modular home is uninhabitable. For example, ALE coverage would pay for a hotel room if your house caught fire, until your home is repaired and ready to live in once again.

Other Coverages: There are many other protections available for modular homeowners insurance, such as coverage for a detached building like a garage, debris removal and identity theft protection. Availability of these additional coverages varies by insurer, so you may need to check with multiple companies if there is a specific coverage you're looking for.

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