Modular Home Insurance
When building a modular home you need insurance coverage for five parts of the project:
- The delivery of the modules
- The set of the modules on your foundation
- The work done to your land before and after the modular delivery (tree clearing, excavation, foundation, etc.)
- The work done to complete the “button-up” of your modules after the set
- The completed home after you receive a certificate of occupancy from the building department
Most of this coverage should come from the companies that are completing each step. The delivery and set of the modules, including the crane, should be insured by the modular manufacturer and/or modular dealer. To ensure your modular home insurance is in place, you need to ask each modular dealer you are considering to have their insurance company mail you an insurance binder. It is best to receive it directly from the insurance company, since it is fairly easy to fake the forms. Make sure the coverage includes sufficient liability insurance and workers’ compensation; ask your insurance agent for the recommended amounts. This will limit your potential liability if the dealer or one of his subcontractors is not fully insured and something goes wrong during the set, such as an accident causing a serious personal injury or significant property damage to your home.
You need to follow the same procedure with your general contractor (GC) and any subcontractors you directly hire to complete the work to your property and the button-up of the modules. Secure a certificate of insurance from each of your contractor candidates before making your final selection. Ask your own agent to review the coverage.
You should also insist that your contracts with your modular dealer and contractors state what modular home insurance coverage each of you is obligated to provide. You should accept responsibility for obtaining a builder’s risk policy or its equivalent. The contractors should accept responsibility for providing general liability insurance and, if they have employees, workers’ compensation.
Modular Home Insurance with a Builder’s Risk Policy
The advantage of a builder’s risk policy over a typical homeowner’s policy for your own modular home insurance is that it automatically provides coverage for theft of building materials and supplies as well as vandalism. You should direct your insurance agent to provide this additional coverage even if you opt for a homeowner’s policy. Since your personal circumstances may differ and your agent may offer other alternatives, consult with your agent.
Modular Home Insurance and Lender Financing
If you are paying for the modules with funds from a lender, which means you are paying by the assignment-of-funds method, your lender will require you to have your modular home insurance in place when you close on the loan. If you are financing your home with your own funds, have coverage in place before your GC begins any work.
If your lender is paying for the modules after the set, the dealer’s insurance should be responsible while the modules are parked on your property before the set, since you will not yet own them. If the dealer does not provide coverage, you should direct your insurance agent to provide it. If you are using private funds to pay for the modules upon delivery, your insurance should provide coverage when the modules are parked on your property, since you will already own the units. You should verify this. Your insurance is less likely to provide coverage when the modules are stored away from your property in a staging area. If you cannot obtain coverage for your situation, ask the dealer for help.
Instruct your insurance company to mail or fax your modular dealer a certificate of your modular home insurance a few weeks before the scheduled delivery. This proves that you have the necessary coverage. The effective date should be set at least 48 hours before the scheduled delivery date and remain in place for at least a week. The certificate should state, “[Dealer’s company name] is loss payee as interest may arise.” The certificate protects the dealer and manufacturer should your modules suffer damage after they are set on the foundation but before your lender pays the dealer. This might happen, for example, if lightning were to strike the modules the first night of a two-day set. Should this unlikely event occur, the certificate ensures that your insurance company would compensate the dealer so he can pay the manufacturer. Once the dealer is paid for the house, he no longer has any insurable interest, so your insurance coverage reverts to you and your lender. The manufacturer’s insurance should cover the modules while they are being delivered to the site. The dealer’s and crane company’s insurance should cover the modules while they are being lifted onto the foundation.
Modular Home Insurance for Personal Property During Under Construction
Do not move any of your belongings into your home before your GC finishes his work without his permission. If the GC agrees, he will ask you to use those rooms he has finished. If you intend to store your things in the basement, he must have already completed all of his work there. Since you are responsible for theft or damage, ask your insurance agent about your coverage.
Modular Home Insurance Costs Less
Modular home insurance during construction will save money compared to insuring a site-built home due to the shorter construction time. The shorter construction period also lessens your exposure to the typical risks that attend construction sites, such as vandalism and the pilferage of construction materials. Vandalism is further curtailed because the modules can be secured more rapidly than a site-built home. The ability to quickly secure the modules also makes it more difficult for someone to steal construction materials. Pilferage is further reduced because of the size of the modules; you cannot walk off with a module in the way you can carry away a few boards of lumber. Completing the home more quickly also reduces your biggest financial risk, that of a personal injury to a contractor working on the job or a neighborhood child playing around the home after hours.
For more information about modular home insurance during its construction, see Selecting a Modular Home Dealer, Selecting a General Contractor, and Financing a Modular Home in my book The Modular Home.