Don’t Reduce Home Insurance Because of Reduced Real Estate Value
You may be more tempted than ever to take advantage of the benefit of a lowering home value by also lowering your real estate insurance, but experts highly frown upon this practice. Why, you ask? Because there’s much more to determining home insurance rates than the assessed home value.
The main issue associated with reducing the amount of home insurance you currently carry is that it covers things that home values don’t take into account. For instance, if you wanted to rebuild your home, the cost would be as much as 30%more than purchasing a new home as is, or building on an empty lot. This is because the cost of demolition, removal of damaged property, and even the hassle of working around existing landscaping can be pretty high. So if you are basing your home insurance on your declining home value, you might be disappointed if something requires rebuilding and you no longer carry enough insurance to cover it.
Also, when determining a home’s true value, the cost of the lot that it sits on is a factor to consider.If a home is assessed, the lot is usually not included in that assessment. As a result, basing your insurance coverage on the assessment alone could easily leave you under-insured.
This doesn’t mean that there’s no way that you can save on home insurance if your home value has lowered. But it does mean that it’s a good idea to work with your insurance company to determine the true value of your home, including rebuilding costs, to make sure that you actually insure the entire worth of your property.