Home Insurance Rates Up, Even in Down Market

Home insurance is one of most homeowners' least favorite subjects. So not surprisingly, the realization that home insurance rates have gone up while the market value of many homes have fallen hardly gets talked about at all. Jennie L. Phipps of our sister site WalletPop.com explains this confusing situation.

Themarket value of your homemay have fallen as much as 50% over the last five years, but your homeowner's insurance bill has probably risen. Why is that and what can you do about it?

Like it or not, the insurance industry is firm about the answers to these questions. They say the cost of insurance is based on how much money it takes to rebuild your home to its current condition. That number, they insist, hasn't dropped and in some places has risen because the cost of demolition and the removal and disposal of things that can't be reused is rising due to environmental concerns. You can argue the accuracy of this until you are blue in the face, but your mortgage company sees it in much the same way and will require you to carry at least as much insurance as thevalue of your mortgage. If you let the policy lapse, they'll place your insurance with an insurance company themselves and send you the bill.

Elaine Baisden, vice president of products and services forTravelersinsurance says, "The actual cost to rebuild your home and what you can sell your house for are two totally different things. While market values may be decreasing, the cost to replace your home has gone up because it is contingent on materials and labor costs."