Insurance for the Earthship or Non-Traditional Home

By Debra Bailey of Brown and Brown Insurance of Taos

You may have already discovered that finding a company to insure the non-traditional homes, including earthships, strawbale, or berm-homes can be a challenge. That is because insurance companies promulgate their rates based on statistics and use the law of large numbers. Thus far, we do not have a population of these homes adequate to provide the necessary supporting data required by our state’s admitted carriers.
There was a time when it was impossible to insure these homes, but we have made progress. Currently, there are a few Surplus Lines Carriers that will insure these homes on either a Dwelling Fire Policy or a Homeowner’s Policy. We will provide more information regarding these policy types further in this chapter.

Q &A with Debra:

How do I know if my home is properly insured?
Quite often, clients come to me asking that I review their current policy, and I find that they actually do not have a Homeowner’s Policy, but rather the more limiting Dwelling Fire Policy.

For the policyholder, it is important to know there is a difference in the Dwelling Fire Policy and the Homeowner’s Policy. If you do not see these words on the policy’s declaration page, look at the policy form numbers for these identifiers: DP-1, DP-2, DP-3, HO-2, HO-3, HO-5. The DP forms represent the Dwelling Fire Policy forms. The HO forms represent the Homeowner’s Policy forms.

HO Policies provide broader coverage than DP Policies. If the insured home is OWNER occupied as either a primary or secondary home, purchasing a Homeowner’s policy is required. If the home is tenant occupied, then it is appropriate to insure it with a DP Policy.

Why is my agent asking me to sign a disclosure statement acknowledging that my home is insured with a non-admitted carrier? What does that mean?
An admitted carrier is an insurance company that has been approved by the state’s insurance department.
The insurance company must comply with state insurance regulations, and in the event the insurance company fails financially, the state will step in to make payment of claims.

A non-admitted carrier is an insurance company that has not been approved by the state and does not have the backing of the state’s guaranty fund in the case the company becomes insolvent.

By law, if an agent places your insurance through a Non-Admitted carrier, they must inform you of this and the agent will document their disclosure by having you sign the disclosure statement.

Is being insured by a non-admitted carrier a bad thing?
Not necessarily. While it may seem as if admitted carriers are the clear winner between the two types, there are other issues to consider as well. Insurance companies are given letter grades form A++ to F. The grades are calculated by a credit firm called A.M. Best, which has been rating insurance companies since 1906.
The A++ is the best and highest rating, while the F is the lowest rating a company can receive. So, though a company may be a Non-Admitted Carrier (such as your Lloyd’s companies), this company could have a financial rating of A++. And, you may have an Admitted Carrier with a C rating. Which would you prefer? I would definitely prefer to take my chances with the A++ Non-Admitted Carrier.

Any carrier with an “A” rating or better is a good bet.

What is the right amount of insurance to purchase on my home?
The subject of one’s home value can be a confusing subject. If you look at a home appraisal, you will find that most appraisals reflect the current market value. This is a reflection of the economic conditions for “resale value” of homes in a geographic location. Often times, however, people who build non-traditional homes participate in the building of the home, and do not actually know what it would cost to have a professional contractor build the home.

However, the bottom line is this: Your home should be insured for the current Replacement Value. Should you sustain a loss, the insurance company is obligated to pay a professional contractor to restore or rebuild your home. Due to the current economic climate in most areas of the US, the market value of an existing home is lower than new home construction cost.

It is wise to work with your insurance agent, and have them complete a Replacement Cost Estimate on your home. After providing facts about the features of your home, including square footage, exterior wall material, interior wall material, flooring, ceiling, number of bathrooms, special features such as skylights, solar panels, water filtration systems, heating and cooling systems, etc. your agent can determine the replacement value for your property.

What if I don’t want to insure for full replacement value?
Most insurance policies require that you insure your home for full replacement value because contractually, if your home is a total loss, they are required to rebuild the home in its entirety.

Additionally, personal property insurance policies contain wording in the contract called the Co-Insurance Clause. This states that, if your home is insured for less than 80% of Current Replacement Cost, at the time of the loss, the insured’s claim can be penalized proportionate the amount the home is under-insured. You purchase insured to be fully protected. You don’t want to discover, at the time you have a claim, that your home was UNDERinsured, and you will be penalized in your claim settlement.

If my home were destroyed, I wouldn’t rebuild anyway, I just want X-Dollars to help me start over somewhere new. Is this possible?
It is rare to find a property insurance policy with a cash-pay-out feature. And the few that exist are homeowner’s policies where it is a stipulation that the home be insured for full replacement value. Ordinarily, the Homeowner’s and Dwelling Fire Policies state that the insurance company will rebuild or repair the home, and at the same property location. If you are interested in a policy with the cash pay-out feature, discuss this with your agent.

Does it matter if I shop for insurance on-line, go to an exclusive agent or an independent agent? 
I love shopping on-line and once I have done all my research and I KNOW my product, I feel confident to see where I can get my best deal: Amazon vs. E-Bay vs Best-Buy vs Target, etc. This works for price comparisons on a staple product. But, when I need professional guidance and consultation, I prefer to seek counsel with a professional. A consultation with a personal insurance agent is far more than “just getting a quote.” You can obtain a price quote on-line or by phone. But, I highly recommend that when considering insurance, you do more than get a quote.

Schedule a visit with a licensed agent to discuss your assets, your exposures and your financial/insurance needs. Let this agent provide counsel that will provide choices and a range of coverages to best meet your needs.

So, having said that, let’s talk exclusive agents vs independent agents.

The exclusive agent is licensed and authorized to write with one specific insurance company.

The independent agent is licensed and authorized to write through a variety of companies. This may be advantageous, especially with the non-conventional homes. An independent agent my offer a wider variety of choices to meet your insurance needs.

I am ready to insure my home. What type of information will I need? How do I get started?
Before you waste a lot of time disclosing details, ask the agent outright, “Do you have a market to insure an earthship home? “ Or, whatever type of non-traditional home you may own or be about to purchase.
Many agencies do not, and this will save you a lot of time. If you are working with a builder, they may work with an insurance agency that has already worked out how to work within the constraints of the kinds of homes they build. As the leading agent in New Mexico for insuring earthship homes, we are listed on the website for Earthship Biotecture.

Once you have found an agent that has a market, dig a little deeper. If you need to insure a home that you intend to occupy as a primary or secondary home, ask, “ Can you provide a homeowner’s policy or only the Dwelling Fire Policy?” If this agent can only provide a Dwelling Fire Policy, you may want to keep searching. If you intend to occupy the home yourself, you should be able to find a Homeowner’s Policy.

Seek an insurance agent who has a knowledge of sustainable living home design and is working to educate the insurance underwriters on the design and structure of these homes.

Once you have identified the agent that has an insurance market that might meet your needs, you will need to present the following information about your home:

Year Built, Square footage, Exterior Wall construction type, interior wall construction type, shape and type roof, flooring type, ceiling type, Heating type, supplemental heating sources, garage – detached or attached, location address, distance to nearest responding fire department; is there a fire hydrant within 1000 feet of the home? Do you have dogs? Breed of dog. Any business on premises? List of special features, such as skylights, special filtration systems, etc.

Have you had prior home insurance? Name of your prior carrier? Any prior claims/losses?

The underwriter will also need your personal information: name, date of birth, occupation.

You will usually need to provide at least two color photos of the home: Full view of front and full view of back. Some carriers may request additional photos. If you have construction drawings of your home, they may prove useful.

If there are additional structures such as storage buildings, outbuildings, detached garage or carport, photos of these structures may be required as well.

How do I choose a deductible? 
Property policies include a deductible applicable to physical loss claims. I would recommend choosing the highest deductible you can afford to incur at the time of a loss. I recommend that people think of their home insurance as their back up plan in case of a catastrophic loss. So, if you know you can afford to repair your home for damages within say $5000, why pay the higher insurance premium for a policy with a $1000 deductible. Purchase a policy at a lower premium with a $5000 deductible. Everyone has their own comfort zone. For some it is $1000, for some it is $2500 or $5000. For some it may be as high as $10,000. When shopping for insurance, you should find a range that is in your comfort zone and ask your agent to provide quotes using a deductible range that falls in your zone. For example, compare the insurance premium on a policy with at $1000 deductible, a $2500 and a $5000. Then, you can make an informed choice.

Homeowner’s Policy 101:
The Homeowner’s Policy will include a Declaration of Insurance which will reflect your name, mailing address and the Property Location. It will list your coverage limits. These are comprised of the following:
Dwelling – The limit of insurance applicable to the main dwelling structure.

Other Structures – The limit of insurance applicable to the other structures on the premises such as a detached garage, a storage building, fence, chicken coop, dog house, well shed, fence, statue, water fountain, etc.

­Personal Property – The limit of insurance applicable to everything inside your home that is not attached to the structure, such as furniture, rugs, clothing, electronics, etc. Important note: Every policy has limitations written into the contract that provide limitations on certain classes of personal property such as jewelry, oriental rugs, property used for business, and more. Read your contract and/or discuss these with your agent to learn how to extend your coverage to meet your personal needs.

Personal Liability – The limit of insurance applicable to pay others in case you are held liable for injury to another person or damage to the property of others.

Medical Payments – The limit of insurance applicable in case someone, other than you or members of your household are injured on premises. There are special provisions and limitations concerning employees, contact labor, etc. Discuss these special circumstances with your agent.

Policy forms vary. Some are written to provide Replacement Value on your home and applicable to your personal property. Others are written to insure for Actual Cash Value (replacement cost less depreciation). Discuss this with your agent to be sure you know what you are purchasing.

Dwelling Fire Policy forms are most often used for homes that are tenant occupied. The dwelling and personal property may be insured for either Replacement Value or Actual Cash Value for perils such as fire, smoke, windstorm, hurricane, hail, vandalism, burglary/theft. Do not assume each of these perils is included in your policy. The perils coverage provided must be stated in the policy. The Dwelling Fire Policy is not a comprehensive package, but rather a policy that is built line by line. For this reason, it is not safe to assume that one policy is equal to another. You must be certain that each coverage has been added and rated into your package.

It is very important that you look for your Personal Liability coverage on this policy. I have reviewed a lot of policies where the agent did not include this protection and the customer was unaware. Failure to include this protection will result in a serious gap in your insurance protection.

How much Personal Liability Insurance should I purchase?
That is like asking, ‘how high is high?” There is not definitive answer. Any of us are at risk of the unknown, unexpected. The basic Homeowner’s or Dwelling Fire Policy will offer coverage options ranging from $25,000 to $500,000. The increased premium for the higher limit is nominal. Therefore, I strongly recommend the maximum liability available through your carrier. For added protection, you may wish to speak with your agent about a Personal Umbrella Policy that provides excess liability over your basic policy. Should you find yourself in court as a result of an accident that led to a serious injury or fatality, the dollar amount of the settlements can easily add up to millions.

“You can’t get blood out of a turnip,” is a phrase I’ve often heard spoken by the individual who believes his assets do not warrant concern or the need for higher limits of liability insurance. Most often this person does not realize that if the court awards a settlement of, let’s say, $1million, and his personal liability limits $50,000, the insurance company will pay out the $50,000 and the court will hold the individual liable for the remaining $950,000. This places your assets at risk, which will include your savings, your retirement account, and future earnings.

If you are considering your need for higher limits of insurance, please consider these facts:
Have you ever hosted a party at your house? You could be held responsible if a guest is injured on your property or causes an auto accident after being served drinks in your home. If a lawsuit is brought against you, your current assets and part of your future earnings could be at risk.

The following incidents affected real customers who were protected with a Personal Umbrella Policy:
  • An insured was a chaperone for his child’s field trip and one of the children was seriously injured resulting in a payment of $850,000.
  • An insured lost control of their vehicle during a rain storm and caused two fatalities resulting in a payment of $2 million.
  • A swing set broke at a birthday party and injured a guest resulting in a payment of $1 million.
  • An insured’s son got into a fight at school injuring another student resulting in a payment of $1 million.
  • An insured was skiing and colided with another skier causing an injury that resulted in permanent paralysis; resluting in payment of $5 million.
Now, look at what can happen if you DO NOT have a Personal Umbrella Policy.
If you have only $300,000 liability coverage and you are sued for a $1 million claim,
without a Personal Umbrella, you could personally be on the hook for $700,000.
A Personal Umbrella policy protects you and your family with:

Additional liability coverage from $1 million to $5 million for your primary and secondary homes, rental properties, automobile, motorcycle, watercraft, recreational vehicle and more

Legal defense fees – even if it’s a frivolous case, the defense cost alone could add up to Thousands of dollars

The information provided within this chapter merely scratches the surface on the subject of personal property insurance. It is not intended to replace the counsel of your personal insurance agent, nor replace your policy contract.

The bottom line is that you should choose your insurance agent as carefully as you would your medical physician or legal advisor. Your financial future is at stake. Plan to set up at least one meeting per year for an insurance review with a trusted insurance consultant. Discuss any pertinent changes in your property and/or lifestyle that might warrant a change in your insurance protection needs.


Debra 9-8-14 (Custom)Debra Bailey is a veteran agent with over 20 years experience in the field of property and casualty insurance. Debra is the foremost expert in obtaining insurance for earthships in the US, working through Brown and Brown Insurance in Taos. Debra will help readers navigate requirements to obtain insurance, and will answer insurance-related questions that have a direct effect on your ability to obtain financing.