Real Property: What it is and how to insure it

Our homes are our safe place. We spend time, energy, and money cultivating a place we love,  a place we are proud of, and a place we want to spend our time. Sometimes, however, we need to find a new home. 

Maybe you’re looking to upgrade in size, location, age, or layout. Maybe you’re looking for more land and a place for your family to spread out and enjoy. These are worthwhile endeavors, but in most scenarios, the search for a new home involves selling your current house as well as finding a new place to call home. 

Entering the real estate market can be tricky. It’s a balancing act of finding the right house at the right price and getting it locked in before other potential home buyers. There are legal matters to navigate as well as very specific limitations to understand. For example: do you need to increase your insurance as your property values increase?

The answer to this may have to do with what is considered your property.

In simple terms, real property is your real estate assets. But that can be hard to define, especially when certain structures and types of homes don’t qualify. It’s important to understand what real property is, how it’s defined, and how to insure it.  

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Real Property Defined

The first step in the buying or selling process is defining and understanding property. Real property doesn’t mean property that simply exists. It is defined as structures permanently attached to the ground and the related assets.

So structures like homes, garages, fences, and even sprinkler systems are considered real property. These structures are, for the most part, permanently fixed to a property and will not be removed when a property owner leaves. 

Other assets are real property as well. These are less about structures and more about materials. The natural assets connected to a property are also considered real property. These are things like gas, oil, trees, and minerals. 

All these things, permanent structures, and natural assets are part of the land parcel and purchase agreement. 

What doesn’t qualify?

With the newly established definition in mind, what is not real property? Anything, structure or otherwise, that can be removed from a property is not considered real property.

There are structures, however, that do not qualify as real property. Large structures like manufactured homes and sheds are not real property. These structures are not permanently fixed to the ground and are considered mobile. 

There are ways to make these structures real property, however. Manufactured homes can be converted to real property by being permanently affixed to a piece of land. This requires some legal processes and paperwork, as well as no small amount of construction, but it is possible.

The same is true for sheds. Sheds must be bolted to the ground to be real property. This can be accomplished, and those structures must then stay with the property. 

Why is real property important?

If you’re buying or selling a home using a real estate agent, then these definitions and distinctions will be made clear. It’s a good idea, though, to have a general understanding of real property versus everything else even when you’re working with a real estate professional. This is one of the essential questions you should ask your realtor when selling or purchasing your home.

If, on the other hand, you’re going at the real estate game on your own, then understanding real property is one of many tips you’ll need to sell your home without a real estate agent.

Real Property vs. Personal Property

So there’s real property, and then everything else? Well, yes and no. Real property is all the real estate assets and structures, those things permanently affixed to the piece of property.

The mobile or transportable contents of a home or structures are not considered real property. These entities fall under the personal property category. Personal property would include clothing, cars and boats, and furniture. 

In other words, personal property is the contents of a home or structure. These are the pieces of a person’s life that will travel with them wherever they move. 

Real Property and Insurance

Defining and understanding real property is beneficial in many ways. Not only will you be able to better assess your property and those you might be interested in purchasing, but you will also know how to protect your property. 

Different types of real property require different insurance policies and coverages. Knowing and understanding the differences will help you better protect any real property from potential loss.

Take homes and structures, for example. Your primary residence is covered by your homeowners’ policy. This policy can also be extended to cover some of the other structures on your property such as garages and large outbuildings. 

The ability to extend your policy is fairly straightforward and relatively easy to accomplish. If you happen to add additional structures that qualify as real property, it’s a good idea to update your policy and ensure there are no lapses in coverage. 

The land is also covered by your homeowner’s policy. The property your home sits on falls under the coverage of your homeowner’s policy. If, however, you own property in the form of a vacant or undeveloped lot, you will need additional coverage.

Vacant or undeveloped land will require a land policy. Because fire or other damaging forces will affect vacant land differently than land that houses homes or other structures. It’s best to update your policy or procure a policy that adequately covers your vacant lot. 

Final notes

If you’re looking at a personal property like cars and boats, you will need separate insurance policies. These policies can often be bundled with your home and land policies for some discounted prices, but the policies will be different. It’s important that these pieces of property are covered appropriately. Any lapse in coverage can result in both property and financial losses.

Defining, identifying, and covering property is a vital step in the process of buying or selling a home. Without knowing what qualifies as real property, you can be setting yourself up for loss and confusion. 

Take the time to identify the pieces of real property you own. You’ll be able to communicate this effectively with your real estate agent and better prepare yourself for the buying and selling process.

Written by Laura Gunn. October 8, 2022

Laura Gunn writes and researches for the home insurance site, Clearsurance.com. She comes from a long line of real estate buffs, and she is passionate about homeowners understanding the ins and outs of homeownership.