Friday, November 6, 2009

The "M" Word and What It Can Mean To Your Insurance Company

With the great values in the housing market today, first time buyers and investors are finding some great deals.

One potential client asked for a quote this week on a home that happens to be a manufactured home. For those of you who are not familiar with this type of construction, the walls of the home and other parts are built at a factory, brought to the construction site and assembled. Instead of putting up one board at a time, you put up whole walls. Think of it like a puzzle being put together.

In many cases the homes are attached to a foundation such as a concrete slab, and placed on the county tax rolls like a traditional site built home. For most preferred insurance companies, if you have to use the "M" word (Manufactured) to describe the home; you have to insure it the same was a you would a mobile home in a trailer park. Most preferred companies won't insure manufactured or mobile homes. Companies that provide manufactured and mobile home insurance will sometimes insure them on the same policy type as a traditional home but allow for the differences in the homes construction method.

Why does it make a difference?

Well, let’s say you have a claim. There is a fire, a tree falls on the roof, some jolly drunk runs into the house at 2 am, take your pick. You insured the home on a traditional homeowner’s policy; your insurance carrier would probably discover in the course of repairing the damage to your home that it is a manufactured home. They don't insure manufactured homes. Your claim could be denied.

Now let’s say the tree, the drunk, or the fire happens and you are insured with a manufactured home policy. You are covered. You pay your deductible, the insurance carrier picks up the rest and after some hammer time your home is back up to having Aunt Gladys over for the holiday.

I understand that it's a pain to get insurance on a home. I listen to clients every day and explain to them why the insurance coverage on their home is more than what they are paying for it at today's real estate prices. My insurance on my own home has gone up this year to and I have never had a claim. I talk about rebuild cost, debris removal and all the things that could trigger a claim. I know that people are only looking at the price, not the benefit. I also know that when something happens, you are going to be wondering if you have coverage. It's better to insure you correctly in the long run. You pay your yearly premium and your deductible, in most cases about $1,600 on average for both ($600 for the yearly premium, $1,000 deductible), and the insurance company pays out tens of thousands or more depending on the claim. Not a bad trade if you ask me.

Think about people at a salad bar. Most will take lettuce, tomatoes, maybe a carrot or two or some bell pepper. Others will skip the carrots and go for baby corn, olives or radishes. Some may skip the salad altogether and go for the pasta, potato or macaroni salad instead. Insurance carriers are the same way. Some like traditional site built homes, good drivers, renters and landlords. Others like properties that may need a little work, have unique construction and drivers with 5 speeding tickets in the last year. Insurance is about matching your needs and potential liabilities with a carrier that will cover that risk.

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