Reducing Homeowners Insurance If Property Decreases In Value

Posted on May 2, 2007

A question was posed today at work: If a home is worth less now than it was a few years ago (unlikely situation, but possible) can money be saved by reducing homeowners insurance to reflect this?

Answer: Most likely not. Homeowners insurance is replacement value, not market value. There should be enough insurance to rebuild your home if completely destroyed. Even if the market value of your house has declined, the cost of building materials (concrete and steel most notably) and labor continue to skyrocket. The bottom line is your home should be insured for its full replacement value (excluding land). If you feel this is not the case you may want to have a talk with your insurance agent. It never hurts to give them a call and make sure your policy is up to date.

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