Mobile homes require a different type of insurance policy from traditional homes because of the different risks involved.
First, it is important to draw a distinction between three phrases – mobile homes, manufactured homes, and modular homes. They are similar in that all three are built in factories and transported to their final destination.
Modular homes are factory-built, but are assembled on site to be more like a traditional home with a foundation for support. They generally have heavier materials of construction and must meet local building codes. They are made to be permanently anchored and not moved – thus, they are insured through traditional homeowner's policies.
Mobile homes and manufactured homes are basically the same thing, but from the view of the Department of Housing and Urban Development (HUD), a mobile home refers to a model built before June 15, 1976, and a manufactured home refers to models built after that date. Both are held in place by ground anchors and do not necessarily have any form of permanent foundation. The less permanent anchoring and potential mobility represents higher risk and therefore a different type of policy.
Like a traditional homeowner’s policy, mobile home insurance requirements vary by state (as do rates). Your policy will likely contain these components:
- Damages – Comprehensive coverage typically covers damage to the home from fire/smoke, falling trees or other objects, tornadoes or wind damage, lightning, and other adverse events (usually referred to as "perils"), unless they are specifically excluded. (Flood damage is not covered in most mobile home policies, so if you live in a flood prone area, make sure to obtain it separately.) Other types of coverage are designed to cover a specific package of perils for a lower cost.
- Personal Belongings – Coverage for the contents of the home up to a certain amount as specified by your policy. Jewelry or anything of unusual value should be covered under a separate policy.
- Liability – Covers you for lawsuits regarding injuries that anyone may suffer on your property that result from negligence on your part. Depending on the policy, the medical expenses may be covered without a lawsuit being involved.
You will generally be able to choose from other options including partial living expenses for some time after your home is destroyed, coverage during transport, and coverage for secondary structures such as sheds.
As opposed to a standard home that appreciates in value, mobile homes are considered to be more like your car – a depreciable asset that drops in value over time. As a result, policies are set up to pay damage claims in one of two formats.
- Cash-Value – Payment is based on the depreciated value of the home based on published value guidelines, similar to auto insurance. Payment/coverage amounts drop off rapidly but the premiums are less expensive.
- Replacement Cost – Payment is based on the replacement value of a new home of the same quality and size as the destroyed home. Premiums are more expensive compared to cash-value policies.
Costs will vary significantly depending on the amount of coverage you select, as well as with state regulations, the collective risks of the area in which you live, and the type of home you choose. In general, the rates of mobile homes are lower even with the increased risks because of the difference in value compared to a standard home – especially when depreciation is involved.
You have more flexibility in mobile home insurance to build the coverage you want, so take advantage of that. Insurers will help you to create a policy that is the best fit for your needs and budget. Just make sure that you understand what is and is not covered under the policy that you choose.