It’s not hard to see why tiny homes have exploded in popularity: they’re charming, cheap, eco-friendly and even portable, allowing their owners to go on cross-country adventures. There’s just one catch — tiny homes can be much harder to insure than traditional homes, leaving their owners vulnerable in case of theft, fire, and other disasters.
Luckily, insurance companies are already adapting to the trend with new products for savvy shoppers. You don’t have to navigate this brave new market all by yourself — independent insurance agents are industry experts who can help you find the coverage you want at a price you can afford. To find out how, read on.
The Shrinking American Home
Home sizes in the U.S. ballooned for decades, spurred by rising incomes. In 2015, the average home size in the United States was 6440 square feet. Since then, however, the average American home size has actually begun to shrink, and is projected to fall to 6120 square feet by 2023.
Average size of homes in the United States from 2015 to 2023 (in 1,000 square feet)
Tiny homes allow for more economical living, environmental friendliness, and greater opportunities for quirky and personalized design. They’re easier to take care of and may better fit the lifestyles of small families and empty-nesters.
In short, it’s no wonder that home sizes are shrinking — or that the tiny home movement is growing.
What Counts as a Tiny Home?
Any home under 1000 feet could run into insurance problems as a tiny home, but it’s only once you reach truly tiny proportions — 400-500 square feet or less — that it becomes essential to find coverage specific to tiny homes.
How Does Tiny Home Insurance Work?
Tiny home insurance follows the same process as all other types of insurance do. Namely, that people pay monthly, quarterly, or yearly payments (called premiums) to an insurance company in exchange for coverage for circumstances outlined in the insurance contract.
For example, if your tiny home insurance covers fires, and your tiny home is destroyed by a qualifying fire, then your tiny home insurance would help pay to replace your home and belongings.
What Insurance Challenges Do Tiny Homes Present?
In short, four things: their size, their value, their design and materials, and their portability (in the case of mobile tiny homes).
- Size: Smaller homes tend to be more vulnerable to wind damage and other natural disasters. In tiny kitchens, fire is also a significant risk. Accidents in tiny homes are more likely to damage or destroy the entire home as opposed to only a small part.
- Value: Tiny homes are meant in part to counter a consumerist culture of over-consumption. Almost by definition, a tiny home is worth significantly less than a traditional home. The math of homeowners insurance is designed for large values, so the cost/benefit calculation on a tiny home gets wonky, fast, for both insurer and insured.
- Design and materials: Tiny homes are often homemade and may be built out of lightweight or eco-friendly material that present different risks than traditional construction materials do. Even if these factors don’t inherently make the home less safe, they present an unknown quantity for the insurance company — and insurance companies don’t like to deal with unknowns.
- Portability: If your tiny home is meant to travel with you, whether it’s a modified RV or trailer, or simply a home that can be towed from place to place, this adds not only risks incurred in travel (such as an accident while driving) but also different local risks that can significantly affect the cost of insurance. For example, setting up your tiny home near a Gulf Coast beach will have very different risks than camping out in a remote valley in the Rocky Mountains.
All of these factors make tiny homes harder to insure than traditional homes. Luckily, “harder” doesn’t mean “impossible.” It just means that tiny home residents need to do a little more legwork to find the right homeowners insurance.
Who Needs Tiny Home Insurance?
Tiny home owners need insurance for the same reasons traditional homeowners do, because most people don’t have enough cash on hand to comfortably pay for a lawsuit having to do with their property (whether it’s ultimately found to be bogus or not), or to replace their home or their belongings in case of physical damage or theft.
There are a couple of major differences between the needs of tiny home owners and traditional homeowners, however:
- Less financing or no financing: Because tiny homes are cheaper to build and maintain, tiny home owners may take out much less financing to build or purchase them, or even no financing at all. Most mortgage lenders require home buyers to carry homeowners insurance. If a tiny home owner owns their home outright, then they won’t be subject to this requirement.
- Lower value/cheaper replacement cost: A tiny home will probably cost less to replace than a traditional one. In addition, the stuff inside the home will also likely be cheaper to replace, if only by virtue of the fact that tiny homes can’t fit as many belongings inside them as traditional homes. If tiny home owners have sufficient savings, they might choose to simply pay cash in an emergency rather than dealing with an insurance company.
The Best Ways to Insure Tiny Homes
The right option for insuring your own tiny home will depend on its specific design and on the unique needs of you and your family. However, there are a few general tips and tricks for insuring tiny homes that every tiny home owner should explore:
- Dwelling insurance (HO-1 coverage): Dwelling insurance is the most basic kind of homeowners insurance. It only covers the structure of a home (not the belongings inside), and only from certain scenarios outlined in the contract (called “named perils”). It’s typically quite cheap. As long as your tiny home qualifies for dwelling insurance, it’s a solid, no-frills option.
- Mobile home insurance (HO-7 coverage): Mobile and pre-fabricated homes have similar insurance challenges to custom-built tiny homes, namely because of their size, lower value, and nontraditional building materials. Some insurance companies may allow you to customize a mobile home insurance policy to suit the needs of your tiny home.
- RV insurance: If your tiny home is portable, RV insurance is probably your best bet. It’s able to handle both the risks of traveling from place to place and the different risks you’ll encounter in different areas of the country. It’s also able to handle the low value of tiny homes.
- Special programs: Some insurance companies have begun offering insurance designed especially for tiny homes. If you live in an area where these special programs are available, then they’re a natural choice for tiny home owners.
An independent insurance agent should have a working knowledge of all of these options and can help you decide which one is a good fit for you.
What Your Independent Insurance Agent Needs to Know About Your Tiny Home
Independent insurance agents are experts who can walk you through every step of buying insurance for your tiny home. Here are some of the most important questions they're likely to ask in order to help you find coverage:
- How much is it worth?
- What is the square footage?
- When was it built?
- What materials is it made of, especially exterior wall and roofing materials?
- How was it constructed? (Prefabricated, built by contractors, built yourself, etc.)
- Is it mobile? If so, where and how do you plan on traveling with it?
- Who lives in the tiny home? Will children or pets be living there?
- What types of appliances are inside?
- How do you heat or cool it?
- Does your house have plumbing with running water?
- Are there water sources nearby that firefighters could use in case of fire? (Even a nearby pool or natural water source like a pond could count for this.)
- What do you want out of tiny home insurance? What coverage (fire, theft, liability, etc.) is most important to you?
Thinking about the answers to these questions ahead of time streamlines the process for you and your agent. It's also a good idea to create an inventory of the belongings you keep in the home, especially valuables.
How Much Does Tiny Home Insurance Cost?
The cost of tiny home insurance will be highly specific to your area and the specifications of your tiny home. It will typically be less than $1000 a year, possibly as low as $200 to 500 a year. This cost can be spread out over monthly or quarterly premiums.
The Awesome Benefits of Independent Insurance Agents
Unlike captive agents, who only work with one insurance company, independent insurance agents work with a variety of insurance companies to find coverage for their clients. This makes them a perfect match for tiny home owners looking for insurance. Independent insurance agents aren’t stuck with only one company’s offerings — they can help you navigate the entire emerging tiny home insurance market to find coverage you can feel great about.
Shopping with an independent insurance agent is shopping smart. Period.