Tiny House, Tiny Living, The Tiny Life.

Tiny House Insurance

In the wake of the recent Kim’s Tiny House fire I found myself thinking about insurance options for Tiny Houses.  Now I have heard many people speak about their efforts to get insured by traditional companies through various approaches.  Many were not able to and the one who did are few and far between.  Where I get hung up at is even if you were able to get insured from an insurance company and had a claim, I see it going only one way.  Call me a pessimist, but I don’t think it is stretch that once that claims adjuster comes to your property, takes one look at your Tiny House, they will be on the phone working out a way to get out of paying.  They will come up with some way out of paying, leaving you high and dry after being a dutiful customer.

Inherently a business makes money by increasing it’s income and decreasing it’s expenditures;  the gap equals profit.  So a for profit insurance companies ensures it profit by being efficient internally and minimizing the money paid to it’s customers.  In a perfect world they could do this while maintaining ethical standards, but we have seen that is far too often, that is not the case.  So what is the solution?

The old adage, if you want something done right, you’ll need to do it yourself.  So what if we were to create our own insurance company, a non profit entity, maybe even a Co-Operative?  A entity that was dedicated to Tiny Houses, that protected it’s people in a fair and just way.

Members would pay a monthly fee, which would be gathered into a non profit bank account, we could position the funds (or part of them) to earn a certain interest rate to ensure that we keep ahead of inflation, but it would be a extremely low risk option.  I think it would be prudent to have a $500 (maybe $1000) deductible to minimize very small claims.  By doing this, it would mean that who ever is running it isn’t spending hours processing dozens of claims for a $50 claims.  So it saves the insurance funds from being whittled down in little chunks and save on a lot of costs of staff time.

What would be interesting is after a member has been with the insurance company for more than 3 or 5 years without a large claim, their rates could drop to half the original rate.  The idea being that you have paid enough into the system that it has amassed to enough to cover a big claim.  We would have to decide if their rate would rise if they were to submit a large claim.

The real trick is to get enough people involved so we could get some economy of scale, the large number of people we have, the quicker the fund could grow to a point where it could take several total loss claims.  So that is some of my thoughts on how to approach this issue, protect our tiny houses and build a stronger community.

What your thoughts? Let us know in the comments!

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20 Comments
  1. LOVE this idea, sign me up!

  2. Us too. If you can pull this off consider us in!

  3. First of all, I do not agree that existing insurance companies are (a priori) dishonest. They don’t cover tiny houses because they are owner-built structures of UNKNOWN QUALITY. YOUR tiny house may be of excellent quality, waay above IBC or RVIAs standards. But what about Joe Blow’s tiny house made of skids/pallets??? So first you need a standard, then you need someone to go out and inspect each and every tiny house to make sure it meets the standard. You also need to check the honesty and reliability of your members, one rotten apple may not kill it, but a dozen may! Then you have to become a legitimate insurer. Have you researched that process? Then you can try to convince people that YOU are a legitimate insurer. I would find it difficult to trust someone who hasn’t the first clue regarding insurance who, nevertheless, would like to know how much I would be willing to fork over! Also, throwing a graphic or two into your little article is impressive, but your grammer and sentence structure leaves much to be desired. I don’t think, at this stage, you have anything remotely like the professional acumen necessary to organize insurance.provisal.

  4. Karen brings up some valid points but destroys her argument be declaring the post’s “grammer” is not sufficiently error free to have an intelligent person behind it. That is a rude and silly thing to write as the post doesn’t say the author would be the person running the co-op and it doesn’t take into account that some very intelligent people still make grammatical or spelling mistakes just as she did. It’s so hard to point out the mistakes of others while making them yourself isn’t it?

    Frankly the reason credit unions came about is because some people were not able to get loans from banks and couldn’t finance themselves either. I think this is a worthy subject to explore and see if it’s possible to do. Way to go Ryan!

  5. It’s amazing to me how often posters on the internet need to go into attack mode in order to make a point. The need to shoot down new and innovative ideas is just so strong, it’s amazing anything new ever manages to emerge. Insurance is a complicated issue. Karen raises valid points. At the same time, creative solutions can move us to a new place. Micro-lending and some kind of shared risk insurance are certainly things I want to see this community and others exploring. It is in line with the values of sustainability and community to explore human options for our shared concerns.

  6. I would be interested, but as I am not yet building a tiny house, I did not complete the survey.

  7. It sounds like an option. One might be able to contract with another company/agency to facilitate such a thing. My concern, however, is like others – what standard is used? Many people are very careful with their build and it is safe and sound. Others I have seen are not safe. Consequently, the risks for some are low, while others are astronomical. Coming up with a standard (and being able to prove a tiny-house meets that standard might be problematic. But I would be curious what could be formulate.

  8. Michael makes a good point (as have others about this) and one thing that could be used to help lower risk would be for people who use certified technicians such as a plumber or electrician and can show they’ve used them could get a discount or lower deductibles. How does that sound?

  9. The way I see it, a couple of things work against us at the moment. The relatively low numbers and widespread distribution is a big factor, another, perhaps bigger obstacle is the various laws and restrictions that have been put in place to maintain the status quo for commercial interests. Remember, we don’t serve the purpose of the current infrastructure, rather Tiny House living gives us the opportunity to circumvent a lot of the societal “norms” and the red tape that goes with them.

    But when it comes to insurance I just don’t see the numbers adding up. To get the required number of premiums collected to cover the cost of one or two payouts from such a small client base would potentially make it price prohibitive. Then there are the options you’d be looking to cover, are people looking to cover the cost of replacing their home? If so is that $30,000 for materials or would they like it built for them this time round, in which case it might be closer to $50,000 or $60,000. Which means having to collect $1000 a year from 60 people and nobody having an accident in order just to cover the risk of a single liability. One claim and you break even, 2 and your out of business. And what about the possessions in the home, and any accidents that people have when they visit you? In today’s world with its penchant for litigation I wouldn’t touch the prospect of becoming an insurance co-op with a very long stick, let alone a tiny one. If Lloyds of London Members can make huge losses because of one bad winter, how much could co-op members lose? Don’t forget that if you insure someone you are on the hook and “sorry we’ve paid out all the money we took in” probably won’t cut it when the claimant is left homeless.

    For the longest time I have believed that a better solution would be for everyone to have personal liability insurance and then just get material/possession riders for things like cars, boats, houses. Think how big the pool fund would be if EVERYONE was contributing and how much less we would have to pay. That way if little Johnny sticks a soccer ball though your window, like kids do sometimes, the insurance would cover it and you wouldn’t have to rely on little Johnny’s parents being willing and able to cover the costs of the accident.

    However I think there is a real chance that co-operative solutions would work within the tiny house community but at this stage of the thinking, and especially in terms of insurance, I see too many obstacles that there just are not answers for.

    A Tiny House Credit Union, now that’s an idea I think really has some mileage, however the question of finding a global solution that adheres to all the regional rules and regulations would still remain.

  10. While I agree that many insurance companies are not as ethical as they should be There are a few that are very ethical. I won’t go into my opinion on overly paid executives in this and other fields.
    I admire the idea of having an insurance company that specializes in tiny homes. However, rather than set up a full insurance company there are other methods. For example thos interested may wish to check out Medi-Share at: http://mychristiancare.org/medi-share/ for an idea of people helping people. As has been pointed out remember that there are rules to setting up such institutions and there are expenses even in the case of a non-profit. Thorough research must be performed.
    If I had the expertise I would love to help but I am an entomologist not an insurance specialist.
    Great luck in getting this rolling.

  11. I insure my Tumbleweed with travel trailer insurance by Foremost. It is $500/year, but also covers the risks involved with towing it behind a truck. I always felt it was a bit high, but better than nothing…

  12. Perhaps another option would be to create a co-op program, but have participants keep the money themselves. Participants would have to legally commit (and provide evidence) that they were keeping a certain amount of money ($5,000?) in a safe investment. A portion of that money could then be used to compensate other participants whose houses were destroyed. I am not sure this would be simpler then having all the money in a central location–it might be difficult to track bank/investment records and get people to payout–but it is another option. One major benefit is that participants who decide to leave the co-op insurance program would do so with their $5000 in savings.

  13. I have had no luck with insurance companies. I’ve tried RVAinsurance, Foremost, Good Sam/GMAC, Overland, USAA/Progressive…none will insure a homemade travel trailer.

  14. I think a co-op is a great idea! Maybe to prevent the “bad apples”…we could simply form local communities, and actually get to know each other?!

    I would love to chat with other people in Colorado interested in tiny homes! A tiny home community would be awesome!

  15. We’re finishing up our tiny house in the next month or so and am starting to inquire about insurance. This is a great idea… we’d definitely be interested in being a part of an insurance co-op. Let us know where this goes…

  16. We built a tiny house and have had a terrible time finding a company to insure it for fire, theft and damage. And on top of that, our standard homeowners insurance (it is parked on our property where our home is), will not extend liability protection to cover us if someone gets hurt in the tiny house. I feel like bureaucrats make it so hard for folks to be creative, think outside the box and do things that are non-main stream. If you come up with an insurance co-op, please let us know.

  17. I didn’t read all the extensive comments so I apologize if this is redundant, but maybe an option for starting up something like this would be to crowdfund it?

    You could have people pledge to become a new member, and upon your pre-set start date, everyone pays for insurance. This way, you can know that your research will pay off, and you don’t need to invest money in setting it up unless you get the minimum # of pledges. I think you would have to incorporate a work-in-progress type of insurance for the tiny houses that are not yet up to code and a different price bracket for people that have proof of quality. I would sign up in a heartbeat, but I have a unique situation that others might have as well…

    I live in a roadless valley. Access is only by boat (gotta swim to shore and hike 1/4 mile to the junglestead), private chartered helicopter, or 14 hour treacherous trail crawl. How would people like me get “assessed” for insurance?

    Thanks

  18. If I could get something like renters insurance for my stuff in case it burnt down down, that would be fine. By the time I am done I will have about 15K into our tiny house. If I could get 20K or so I would be covered.

  19. There are a lot of valid points here and some really great ideas, despite presentation. Unless the conversations occur, things won’t happen. These are the good things I have taken out of what I have read:

    1) Homes should be inspected.
    This just makes good common sense, whether you build it yourself or have a contractor do the work.

    2) At minimum a type of renter’s insurance sounds on top of a vehicular insurance would be great. I don’t know how it works for RV’s but it seems to be a good model for other things.

    3)Talk to your community credit union.
    They generally have more flexibility in general and want to invest in their community.

    4) We are a movement and community that should share ideas, even the off the chart ones, because there is often a spark of an idea that comes from even the craziest scheme. America was built on failure.

    Just my humble opinion. Keep the ideas and dreams flowing!

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