Realtor Thursday

As home prices continue to stay low, you may be wondering if you are paying too much for homeowners insurance. Since the value of your home has decreased since you purchased it, is it possible to lower your homeowner’s insurance premiums? While you can lower your insurance premiums, there are a few things you should know before you attempt to lower your payments.

What Is Homeowners Insurance?
Homeowners insurance is an insurance policy that protects you in case there is damage to your home. This type of insurance policy is typically divided into types of coverage. A standard homeowner’s insurance policy will have categories for the home itself, any other buildings that may be present on the property, possessions that are kept in the home and medical compensation for anyone injured on the property. Should a homeowner have to find somewhere else to stay while damage is being repaired, the insurance policy will cover living expenses incurred at a rental property.

The National Association of Insurance Commissioners provides detailed information about homeowners insurance in their Consumer’s Guide to Home Insurance in an attempt to help educate and protect homeowners.

Is Homeowners Insurance Required?
Whether a homeowner needs homeowners insurance is up to the mortgage company, but most lenders do require a homeowner to carry insurance.  HomeownersInsurance.com clarifies that a homeowner is not required to carry homeowners insurance by law, but complying with a lender’s policy assures that a homeowner stays in good standing with the mortgage company.

Even if the lender does not have a policy concerning homeowners insurance, homeowners should purchase coverage for their own protection.

Current Homeowners Insurance Premiums
According to the Insurance Research Council, most homeowners have kept their coverage the same. However, those that decided to change coverage opted for raised deductibles rather than a revaluation or cancellation of their policy.

Lowering Your Insurance Premium
When your home value drops, it seems logical that your insurance premium should also drop. However, it may not be in your best interest. Below are five things you should take into consideration before lowering your insurance premium.

·    Homeowners insurance premiums are based on the costs you would incur to replace your home rather than the current market value of your home. While the cost of existing homes has decreased, the cost of construction has increased. This means lowering your premium to reflect your home’s market value will leave you underinsured.

·    The cost of your home is only a portion of how your homeowner’s insurance premium is calculated. It is also largely made up of the cost to replace items in your home and coverage for medical expenses in the case of personal injury.

·    You will need to review your coverage annually and compare your coverage to current construction costs. If construction costs go down, you can lower your premium accordingly when you review your policy.

·    AgentInsure points out that there may be other ways to lower your insurance premium without lowering your coverage. Talk to your insurance agent about discounts that may be available for being claim-free or investing in updates to your home that lower the possibility of a claim. For example, installing a security system may prompt your insurer to lower your premiums.

·    Any changes should be discussed with an insurance agent. The expertise of a professional will help homeowners avoid a costly mistake made in an attempt to lower insurance premiums.

Ashleigh Denton’s passion for people and art has lead her to pursue a career in writing. At this time, Ashleigh is working as a part-time writer for InsuranceQuotes.org