Does Your Homeowners Insurance Policy Reflect Your Home's Value?

Article Summary: Did you know you can save money on your homeowners insurance policy by reducing the coverage to reflect the true value of your home? If you've seen your home value drop lately, this is something to consider!

Is it just me or does everything cost more lately? Every time I go to the grocery store, gas station or retail shop, it seems I am paying a bit more for the same goods and services than I did just a few months ago. If you're like me, your income has not adjusted to help cover these increases, so you are looking for ways to cut costs.

In light of the current housing market it might be worth taking a look at your homeowners insurance policy to see if you can reduce your coverage amount (thereby reducing your premium at the same time).

In most cases, homeowners need to review and adjust their coverage annually to include the increase in the value of their homes. But lately, home values have decreased all across the United States, and in some places they have decreased a lot. The question is, has your policy coverage changed in correlation to the value?

Here's an example. Let's say a homeowner purchased and insured his home for $750,000 three years ago. In today's market, he may only need a policy to replace the home for $500,000 (if the value has dropped that much). That adjustment in coverage may mean enough of a savings to to make it worth the time and effort of getting a few current quotes. These days, you can even get quotes online, which is a real time-saver.

You should also consider the type of coverage you have. If your coverage includes replacement cost (i.e., it covers rebuilding or replacement of covered items at current cost) instead of cash value (i.e., replacement minus deduction for depreciation), then you may be paying 10% more for your policy. This may be another area where a struggling homeowner can make an adjustment to help save money.

Also, if you've been insured by the same company for a few years, it's still a good idea to get quotes from different insurance companies. There may be one or more out there who will offer you the same coverage for less money. Start here to find out