Home Owners Insurance Goes Up While Your Home Value Goes Down

Homebuyers may be surprised to find that homeowners insurance isn’t going down, despite precipitous declines in sale prices.

“There has been a lot of noise lately around market values, but market value and the cost to rebuild are two totally different things,” says Elaine Baisden, vice president of national property for property casualty insurer Travelers.

Marshall & Swift, which calculates building costs, says it can cost as much as 30 percent more to rebuild than to build. Reconstruction costs are greater because of demolition and removal expenses and the price of bringing older structures up to current codes.

While mortgage companies require borrowers to carry 100 percent coverage at time of closing, it is unnecessary to continue this coverage because the value of the land isn’t at risk. Typically, the building lot accounts for 25 percent of a home’s value.

Source: United Feature Syndicate, Lew Sichelman

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