Home Owner Insurance Bills; Are You Saving Money with Falling Home Prices?
Posted on | November 3, 2009 | 1 Comment
With the housing market in a slum, the value of homes has declined greatly. In areas where homes may be worth 500 thousand, they are now selling for 300 thousand or less. So if the value is decreasing, why are home owners still paying the same high insurance bills?
Insurance companies assess home owners insurance fees based on the cost to re-build that home if it were destroyed today. Therefore, the value of the home, as well as the cost of eliminating waste, and restoring the home to its original condition are all factored in. For these reasons, insurance prices are not changing with the slow housing market.
In fact, home insurance may actually be increasing because despite the fact that the value of homes is not increasing, the cost to re-build a home is. With a slow economy, the price of natural resources, and any good involved in home building is extremely high; therefore, should a home owner’s home be destroyed tomorrow the cost to restore the home to its original condition would be extremely expensive.
Each month when a home owner pay’s their insurance, they are essentially putting money aside in a “savings fund” so to speak, so that if an emergency does occur there will be money available to them to fix their home. However, the amount of money which is set aside is determined by the insurance company not the home owner; moreover, the home owner must meet the insurance company’s guidelines and understand their rules and policies in relation to damage coverage, natural disasters etc.
While it seems logical that insurance should not be high if a home does not possess high value, when evaluating this situation one can see why home owners insurance is actually increasing despite the conditions of the housing market.
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Author: Sylvia Wayne
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November 3rd, 2009 @ 9:07 pm
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