It’s no secret, your home value is probably half of what it was five years ago, but you may wonder why your insurance premium is still going up. The cost to rebuild and/ or repair your home, supplies, labor, etc. have not gone down, according to industry experts. These components are what insurance premiums are based upon. In fact, insurance premiums will only take the structure and liability exposure into consideration – which maybe ticking upwards based on a rise in catastrophes predicted.
“The price of homeowners’ insurance is based on the cost to repair or rebuild your home. The price of a home is based on the market value of that home and the land upon which it sits,” Robert Hartwig stated, president of the Insurance Information Institute. He also mentioned that even though the recession has been hard on the construction industry, it still hasn’t caused a major decrease in materials and labor.
In this crazy upside down market we’ve been in, some say it’s even possible for the cost to rebuild your home is actually more than the resell price.
Also, people are questioning their high loan balances compared to the insurance amount on their policy. For example, the structure coverage might only be $195,000 but your loan balance is $250,000. This has caused many to be concerned so we asked many insurance brokers and the general response was, “insurance does not insure the land but your loan includes the land. If the home had a total loss, then the insurance coverage would pay for the dwelling to be repaired…not the loan to be paid off.”
Many are struggling to keep up with their bills and found that the only way to lower their premiums is to either take a chance and raise their deductible or shop it. You may find a conversation is in line…talk to your agent to make sure all discounts are being applied.