Protection for Nosedive in Property Values
New Insurance to Help Homeowners Avoid Financial Catastrophe
The U.S. housing market has endured many dark days in the past few years. The first quarter of 2011 saw a precipitous decline in home values. Since then, the number of homeowners reportedly “under water”—owing more on a mortgage than the dwelling is worth—has continued to climb.
Exacerbating real estate woes are rampant foreclosures, high unemployment rates, and mounting consumer debt, making the likelihood of home values stabilizing by the end of this year unlikely.
To address this reality, Home Value Insurance Co. is offering a new type of homeowners’ coverage, one intended to safeguard families against a decline in property value. The San Francisco, Calif.-based business announced this week that Ohioans will be the first parties eligible for such a policy. For several years, various financial companies have provided similar coverage for which a homeowner would pay a one-time fee.
Home Value’s pricing model differs in that homeowners pay a monthly premium, which is based on the home’s value and its current location. In the event the policyholder sells the home for less than he or she initially paid, a claim could be filed to recoup a portion of the loss.
“A typical Ohio homeowner would pay $35 to $45 a month,” the company reported to The Columbus Dispatch. “A
via www.propertycasualty360.com
This is a case of excellent post-housing bubble market timing. One would hope that the housing market is at or near the bottom, making this the perfect time for an insurance company to launch a product like this. After all, if prices are bottoming out, it's less likely that the company will have to pay any claims. Also, the implosion of the housing market is still fresh in peoples' minds, making them more likely to consider buying this coverage.
What do you think of this product? A long-overdue great idea that you wish you'd thought of first, or a cynical attempt to capitalize on the pain and fear of others? And do you think this will ever become available in New York? Answer away in the comments.
Thanks for the post Tim. I'm just about to buy my first home from my parents, and I'm wondering what the difference is between home insurance and home depreciation insurance? I want to make sure I'm covered in every aspect.
Posted by: Jim Halpert | October 18, 2011 at 01:10 PM
Jim,
Home depreciation insurance covers a drop in the home's value. Homeowners insurance covers the cost of repairing or replacing the home if it is damaged by a cause that the policy covers (fire, lightning, explosion, vandalism, etc.)
Posted by: Tim Dodge | October 25, 2011 at 12:25 PM
In an unstable market depreciation insurance is a must but sadly people usually think of it when it is already too late.
Posted by: Home Insurance Quotes | March 05, 2012 at 01:13 PM
I want to make sure I'm covered in every aspect.
Posted by: RCA online 2013 | March 10, 2013 at 08:13 PM