Personal Liability Insurance: What Happens When Someone Gets Hurt on Your Property

If your home is significantly damaged or completely destroyed, the last thing you want is confusion around how your insurance claim will be paid. One term that often catches homeowners off guard is  Special Loss Settlement —especially if you own a mobile or manufactured home. So what is it, and how does it affect your payout after a major loss?

Let’s break it down.

Special Loss Settlement  is a clause in some homeowners insurance policies that changes how your claim is paid if your dwelling is totaled or deemed beyond economical repair. This is  not  the standard method of loss settlement for most homes—it usually applies to:

• Manufactured or mobile homes
• Homes that meet specific size or structural requirements
• Dwellings listed as the  policyholder’s primary residence

If this provision applies to your policy, it overrides the typical Replacement Cost or Actual Cash Value settlement methods.

This type of loss settlement  kicks in only when your dwelling is either:

• Completely destroyed , or
• So extensively damaged  that repairing it is not economically feasible

In those cases, your insurance company uses a unique formula to determine how much they’ll pay out.

Under the Special Loss Settlement provision, the insurer calculates  three different values  and pays you the lowest of them:

1. Replacement Cost
   The full cost to rebuild your home using materials of like kind and quality— without accounting for depreciation.
2. 1.5x the Actual Cash Value (ACV)
   ACV is the value of your home  after depreciation  (due to age, wear, etc.). The policy multiplies this by 1.5 as a cap on the payout.
3. Your Policy’s Dwelling Limit
   This is the  maximum amount  listed on your policy’s Declarations Page for the building coverage.

Whichever amount is lowest  becomes the payout amount.

Let’s say your mobile home is destroyed in a fire. Here’s how the numbers might look:

• Replacement Cost:  $120,000
• Actual Cash Value (ACV):  $70,000
• 1.5 x ACV:  $105,000
• Policy Limit:  $110,000

The lowest of those three figures is  $105,000 , so that’s what the insurer will pay.

Special Loss Settlement can significantly impact your payout , especially if your home has depreciated in value or is underinsured. That’s why it’s critical to:

• Understand your policy’s loss settlement terms
• Ask your agent  if Special Loss Settlement applies to your home
• Review your coverage limits  to ensure you’re not underinsured

• FEMA provides more technical guidance on loss settlement terms  right here.
• AARP also offers a helpful explainer on loss settlement options for mobile homes  in this article.

At  Vargas & Vargas Insurance , we specialize in helping homeowners understand what’s actually covered in their policies— before  a disaster strikes. If you’re unsure whether Special Loss Settlement applies to your mobile or manufactured home, or if you simply want to review your current coverage,  we’re here to guide you every step of the way .

📞  Call the Vargas & Vargas Insurance team today at 617-298-0655  for a personalized review and expert advice you can trust.

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