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Exclusive: CoverTree raises $13M to insure manufactured homes

Illustration of a repeating pattern of houses made out of hundred dollar bills.

Illustration: Aïda Amer/Axios

CoverTree, an insurtech serving owners of manufactured homes, has raised a $13 million Series A led by Portage, it tells Axios exclusively.

Why it matters: Amidst a nationwide housing shortage, record-high mortgage rates and rising home prices, manufactured homes are becoming more attractive to potential buyers.

How it works: CoverTree operates as a managing general agent (MGA) and has built an automated underwriting system specifically for manufactured homes.

  • In addition to a direct-to-consumer offering, CoverTree has built distribution partnerships with manufactured home community operators, independent agents, and lenders.
  • Partners include Blackstone-backed manufactured home community operator Roots Management and mortgage lender Rocket Mortgage, CoverTree founder and CEO Adarsh Rachmale says.

Between the lines: Detroit-based CoverTree supports its partners by building out software they can use to manage their business.

  • It offers resident insurance management software for property managers, and a binding and underwriting platform independent agents and lenders can embed into their own operations.

The big picture: More than 21 million Americans live in manufactured homes today, representing about 15% of the nation's housing stock.

  • Given the state of the housing market, however, more homebuyers could turn to manufactured options due to their lower cost and growing availability.
  • The industry trade organization Manufactured Housing Institute says the average cost of a manufactured home is about $127,000 compared with more than $400,000 for a site-built home.

Yes, but: Insurance products for the sector haven't kept up with rising demand.

  • "Manufactured homes have gotten a bad rap over the last 60-70 years. They've been viewed as somewhat non-standard when in reality, their [insurance] performs a lot better than personal lines like auto," Rachmale says.

State of play: According to Rachmale, CoverTree's main competitors are Foremost and American Modern, two incumbents in the manufactured home insurance market.

  • He says about 40% of its business comes from new manufactured home purchasers, another 40% is winning business away from competitors, and 20% from uninsured homeowners getting policies for the first time.

Zoom in: AV8, Distributed Ventures, Detroit Venture Partners, Ludlow Ventures and Annox Capital also participated in the Series A round.

  • Along with the funding, Portage founder and CEO Adam Felesky joined the company's board.
  • CoverTree has raised a total of $23 million since being founded in 2021.
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