Construction Insurance for Building a Modular Home

Why You Need Construction Insurance

Here’s a risky way to save money building a modular home.  Select a modular dealer and contractors who are not properly insured.

Imagine that a neighbor’s child is seriously hurt when he falls into your cellar hole before your modules are set on the foundation. Imagine that one of the trucks delivering your modules strikes your neighbor’s car causing serious damage.  What if the crane company drops one of your modules rendering it unusable? What if a member of the set crew is seriously injured or killed when he falls from your roof?  Or what if the plumber fails to securely connect a pipe, which causes severe water damage before the leak is discovered?

Accidents and mistakes can happen when building a home, regardless of the type of construction. Since the right insurance can mitigate the damages, you need to ensure you’re thoroughly covered.

Require Everyone to Obtain Construction Insurance

This is best done by requiring everyone involved in building your home to have insurance. (Here’s a previous blog that elaborates on the insurance you need.) Making this a requirement won’t prevent disagreements about who is responsible for coverage, but it will increase the likelihood that one or more of the insurers will take on this responsibility, which is a lot better than you being saddled with the liability.

Don't forget to obtain proof from everyone working on your modular home that they have proper construction insurance.
Don’t forget to obtain proof from everyone working on your modular home that they have proper construction insurance.

Verify Construction Insurance Coverage

Making insurance a requirement, however, isn’t enough. You need to verify that each party has a current policy with sufficient coverage. To do this you need to insist on receiving a “certificate of insurance” directly from each party’s insurance agent. Getting a copy of the certificate directly from the insurance agent will protect you against being duped by a dealer or contractor whose policy has run out, since it is not difficult for someone to doctor a photocopy of an expired certificate.  You might be surprised how often this happens, mostly because builder insurance is expensive. There will be no sympathy from the insurance company, however, if you file a claim against a policy that was not renewed. After receiving the certificates, you should ask your own agent to review the coverage. They should be able to determine if the coverage includes sufficient liability insurance and workers compensation insurance.

Secure Your Own Construction Insurance

Since you need to have coverage from everyone working directly on your project, you also need to follow the same procedure with any subcontractors you directly hire. In addition, you should obtain either a “builder’s risk” policy or its equivalent for yourself, since this will provide better coverage against theft and vandalism than an ordinary homeowner’s policy.

For more information about modular home construction 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.

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Free Solar with Your Modular Home

Get a Free Solar System with Your Modular Home

The Home Store has partnered with SolarCity to include solar power with its modular homes – at no extra cost to you. Our homes, which already are very energy efficient, will now generate electricity to help you save money and protect the environment.

To make this happen, SolarCity and The Home Store will help you design your home so it’s “solar ready” and then install the solar system so it’s functioning optimally.  This is your chance to save for years to come.

Electrical Rates Locked In for 20 Years

Your solar system from The Home Store will generate its own clean, affordable energy at a lower rate than you’d pay the utility company. In addition to being energy efficient and energy secure, your home will be protected from unpredictable rate hikes. A SolarCity system lets you lock in low, predictable rates no matter how much utility rates rise. Imagine paying $1.11 for a gallon of gas. That’s the price you’d pay if you locked it in 20 years ago! You can’t go back in time, but you can lock in low energy rates until 2035. You can literally watch your savings grow over time.

Green Solar Energy

In addition to the financial advantages you’ll enjoy with your solar system, you’ll also feel pride in knowing you’re helping to protect the environment. Solar power is one of the cleanest sources of energy because it doesn’t emit any greenhouse gases or other pollutants when it’s produced or consumed. Unlike generating electricity from fossil fuels, creating electricity from sunlight slows global warming.

Solar energy is inexhaustible, unlike fossil fuels, so it will never run out.  It also provides a measure of energy independence since no one can buy the sun or turn sunlight into a monopoly.

The Home Store's two-story model home with solar panels installed by SolarCity.
The Home Store’s two-story model home with solar panels installed by SolarCity.

Sleek Mounted Solar Panels

One of the reasons The Home Store decided to partner with SolarCity is the attractive look of its solar panels. As you can see in the photo of our sales center’s two-story model home, the solar panels sit low to the roof in a sleek, modern appearance that enhances the curb appeal for savvy, energy conscious buyers.

SolarCity Takes Care of Everything

If you order early enough, your solar system can be installed by the time you move into your new modular home. SolarCity will provide the equipment, permitting, installation, and interconnection, again at no cost to you. They will even cover your system’s insurance. They will also continuously monitor your solar system to ensure everything’s running smoothly and provide limited warranty coverage. In the rare event that problems arise, they will complete the repairs at no added cost.

What You Need to Do

You simply lease the solar system for a low monthly fee that’s less than you would pay the utility company. SolarCity guarantees your solar system will produce as much electricity as they promise or they will pay you the difference. The savings can add up to thousands!

SolarCity Service Area

SolarCity serves almost the entire area where we build modular homes, and they are continually expanding their coverage.

Who Is SolarCity

SolarCity is the largest installer of solar panels in the United States with a 35% national market share.  It has disrupted the century-old energy industry by providing renewable electricity directly to homeowners, businesses and government organizations for less than they spend on utility bills.

Benefits of a SolarCity Installation on Your Home Store Modular Home

  • You start saving on Day 1.
  • No additional cost to lease and no increase in your mortgage amount.
  • Frees up money for other option purchases.
  • Guaranteed low, predictable rate for the next 20 years.
  • Insurance and warranty provided for the 20 years.
  • Lease is transferable to next homebuyer for no additional cost.
  • Reduces dependence on fossil fuels and slows global warming.

 

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Exclude Oral Representations

Oral Representations Often Lead to Disagreements

Now that Daylight Saving Time has arrived and spring is two weeks away, many customers are ready to start building their home.  Other customers are getting ready to select their modular builder.  With interest rates predicted to rise by June and housing starts to increase to their highest level in several years, getting started soon is a wise move.  Here is some advice about ensuring that your modular home contract includes what you expect.

Experienced modular builders have lots of stories to tell about the types of problems that cause disagreements with their homebuyers.  One type of problem involves misunderstandings about items that were never discussed or documented because one party just assumed what the other party intended.  Another type of problem involves misunderstandings about things that were discussed but not included in the builder’s contract.  It might surprise you that more frustration, anger, and stress are generated by issues that were actually discussed – but not documented in writing – than by those that were not discussed.

These situations typically involve complaints by the homebuyers such as, “I told you I wanted raised panel maple kitchen cabinets and not picture frame maple cabinets.”  The builder might come back with, “Don’t you remember, we did talk about your preference for raised panel maple cabinets, but the additional cost put you over your budget.”  The problem is that the modular builder and homebuyers had talked about this on two occasions, going back and forth about which would be included, but the final contract just said “maple kitchen cabinets” and now both parties remember the discussion differently.

Your contract with a modular home builder should exclude oral representations and instead require that all details be documented in writing.
Your contract with a modular home builder should exclude oral representations and instead require that all details be documented in writing.

The Cost of Relying on Oral Representations

The cost difference between the picture frame and raised panel maple cabinets would be substantial enough on its own.  But usually this misunderstanding doesn’t get discovered until the cabinets are already purchased and at least partially installed.  It will cost either the homebuyer or builder (or both) a bit of money to make the change.  The alternative is no better.  If the homebuyers accept the picture frame cabinets, they will likely be unhappy with their modular builder and forever disappointed in their kitchen.  The relationship between the two parties will now be fractured by distrust, which will make it more likely that small disagreements will become antagonistic.

Agree to Make Oral Representations Null and Void

The last thing you want to do is to rely on your modular builder’s or your own memory of what you’re getting.  That’s why it is better for modular builders to include a clause in their contract that states that “It is mutually agreed that any oral representation made by either party prior to the signing of this agreement is null and void.”  This clause serves to limit and place boundaries around the scope of either party’s representations and warranties.   Even if an item is discussed and agreed to verbally, it has no legal validity unless it’s documented in the contract.

Replace Oral Representations with Detailed Written Representations

My suggestion is that you share responsibility with your modular builder for documenting all the details by taking notes during your meetings.  You should be concerned if your builder is not also taking notes.  If you then compare your notes with the builder’s contract, you are more likely to avoid contentious and costly disagreements.

For more information about oral representations in your contract with your modular home builder, see Selecting a Modular Home Dealer and Selecting a General Contractor in in my book The Modular Home.

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Modular Home Contract

Six Clauses in Your Modular Home Contract

Three years ago I outlined what should be included in your Modular Home Contract.  I recommend that you take a look at that post before you read today’s entry.

Here are six clauses you may see in your modular home contract.  Their purpose is to document standard construction industry practices that you, as the Homeowner, might not know.  When put in writing, they help eliminate potential areas of disagreement between you and your modular builder.

Modular Home Contract:  Changes, Deviations, or Omissions

This clause states that you agree to accept the minor deviations that sometimes incur in construction as long as the work is substantially the same as described in the contract and within accepted industry tolerance.  Many builders don’t include this clause because the types of changes covered are usually so minor that you are unlikely to notice them.  The reason this clause is sometimes included is that a few homebuyers have been known to get very upset when there is a change of ¼” in the size of a bedroom.

The builder may also include a similar clause that refers specifically to materials and products.  Building code requirements, product availability, and design improvements may compel the builder to substitute material similar in pattern, design and quality to that listed in the plans and specifications.  When possible, the builder should consult the customer when this occurs.

Have an attorney review the legalese of your modular home contract.
Have an attorney review the legalese of your modular home contract.

Modular Home Contract:  Access to Your Property

As the Homeowner, you will at all times have access to your property and the right to inspect the work.  However, if you enter the property or invite others to enter the property during the course of construction, you all do so at your own risk.

Although your access to the property is ensured, this clause points out that you cannot interfere with the work or the modular builder, his employees, or trade contractors.  In addition, you will need to communicate directly with the supervisor assigned to your project rather than other employees or contractors on the site.

Modular Home Contract:  Work Performed by the Homeowners and Their Trade Contractors

This clause speaks to your responsibilities when you perform some of the work or directly hire contractors other than your builder to complete some of the work.  In that case, you are responsible for ensuring that you and your contractors have liability and workers compensation insurance.  You will also be responsible for coordinating this work to avoid disrupting or interfering with the work being done by the builder’s team.  Needless to say, you are responsible for the quality of this work as well as whether it complies with the building code.  In addition, you will need to take care of any warranty work.

Modular Home Contract:  Unused Materials

Builders often have unused materials after they complete their work.  Sometimes this is intended, since it’s easier to return the excess than to leave the job in the middle of the work to fetch what’s missing.  Keep in mind that you have only paid for the materials your builder has used.  This clause states that the builder owns these unused materials.  However, most builders will leave you some extra siding, shingles, paint, as well as some other materials, if they have them.

Modular Home Contract:  Signage and Marketing

Most modular builders will want permission to display a sign on your site until their work is completed.  They will also want permission to invite their prospective customers to walk through your home while it is under construction.  This clause will allow the builder to do these things, but it should also state that prospective customers visit at their own risk.

Modular Home Contract:  Building Code Compliance

Your modular dealer is responsible for ordering the home so that it complies with the state building code current at the time your agreement is written.  Modular manufacturers are required to build their homes in compliance with the code in effect at the time they build your home.  This clause states that when changes happen to the state code, you are responsible for the additional material, labor, services, and other expenses required to comply with the changes.  It also states that you are responsible for the costs associated with complying with local building codes when these codes exceed the state code.

For more information about modular home contracts, see Selecting a Modular Home Dealer and Selecting a General Contractor in my book The Modular Home.

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Modular Home Checklists

There are many things to learn the first time you build a modular home.  But if you’re like most homebuyers, you won’t get the full benefit of what you learn, since you’ll likely only build one home.

But you can benefit from what I’ve learned over twenty-eight years building more than 1,200 homes.  To start with you can read my book, The Modular Home, which gathers all this information in one place.

Use these modular home checklists to guide you through the process of building a modular home.
Use these modular home checklists to guide you through the process of building a modular home.

Take Advantage of My Experience by Using My Modular Home Checklists

Of course, it’s hard to use a book efficiently the first time you use the information.  That’s why I’ve created several checklists that cover the most important steps.  Below is a link to each of the checklists.  There’s also a link to this list on the home page of The Home Store’s website.  I hope you find these modular home checklists helpful.

  1. Ensure You Are Ready Willing and Able to Build a Modular Home
  2. Selecting a Modular Home Dealer
  3. Your Modular Home Dealer Customer References
  4. Selecting a Modular Home General Contractor
  5. Your Modular Home General Contractor References
  6. What to Include in Your Modular Home Legalese
  7. Selecting the Right Modular Home Plan
  8. What You Should Ask Modular Home General Contractors
  9. Reviewing Your Modular Home Floor Plans
  10. Reviewing Your Modular Home Elevation Plans
  11. Modular Additions
  12. Building a Universal Design Modular Home
  13. What Your Modular Manufacturer Needs from Your Contractor
  14. How to Air Seal a Modular Home
  15. Making an Offer To Purchase for a Building Lot
  16. Your Municipal Water and Sewer Connections
  17. Reviewing Your Modular Construction Drawings
  18. Potential Permits and Supporting Documents
  19. Your Modular Dealer and Financing Tasks
  20. Your Permit and General Contracting Tasks
  21. Omitting Materials from the Modular Manufacturer

For more information about all the topics covered in the checklists, see my book The Modular Home.

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