Articles - Archived Expert Advice

Homeowner's Insurance

Because of the economy, my home value has decreased. I am trying to offset this by saving more money. Should I cut back on my homeowner's insurance?

No, you should never lower the amount for which your house is insured just because the value has dropped. Doing so could leave you with insufficient coverage in the event of a disaster.

The market value of your home and its insurance value typically vary because they are based on different assumptions and calculations. The sales price of your home takes into account the value of the land, which is not factored into the insurance value; the land could still be valuable even if your home was destroyed. The insurance value, however, is based on what it would cost to rebuild the house—not on what you paid for it. Although housing prices have dropped in the last few years, rebuilding costs have not. This is why it's always best to buy insurance to replace 100 percent of your home. This eliminates the "guesswork" of how much the home might be worth should you ever need to replace it.

If you make any major home improvements, you should notify your insurer to determine if you need to increase your coverage. You can usually increase your insurance limit by tens of thousands of dollars without significantly increasing your premiums.

If you want to save money on your homeowner's insurance, consider increasing your deductible. An increase from $500 to $1,000 could lower your premium by as much as 25 percent. Plus, increasing your deductible might discourage you from filing small claims that could jeopardize your insurer's claims-free discount or get you dropped by your insurer altogether. Instead, boost your emergency fund to make sure you have enough money to cover the deductible.

LGFCU offers homeowner's insurance, and experts who can match you up with the right policy for your needs. Simply contact us at 877.367.5428 so we can get started.