Real Estate Insurance Debuts Against Falling Prices

By Mike Colpitts

An insurance policy that protects homeowners against loss in their home’s value debuts in one of the hardest hit real estate states this home value protection week as a hedge against falling prices.

The first home insurance policies are being written in Ohio for owner occupied homeowners as Home Value Insurance Company launches its program, which it hopes to take national, despite major declines in housing prices in most of the U.S.

The company has set up an office in Columbus and is starting to sell its home insurance policies through independent agents throughout Ohio. The policies safeguard against risk, allowing homeowners who have typically saved for years to purchase a home to at least partially protect their down payment should housing values fall further.

The firm will use calculations from the Case-Shiller Home Price Index to determine payouts to policyholders who sell below insured values, paying up to 25% of estimated losses.

“This is the first insurance policy developed to help homeowners protect the value of their home from local housing market declines,” said Scott Ryles, Home Values CEO. “For most people, their home represents the majority of their net worth.

“While homeowners have long been able to buy insurance to protect against events like fires and floods, they have never been able to insure the value of their home against future real estate market declines until now.”

declining home values

Under the firm’s program, homeowners can lock in today’s insured value for 10 years, providing protection from an uncertain housing market. Should home values appreciate, insured owners can purchase a new policy with a higher value. For a typical Ohio home, monthly premiums start at $35 to $45.

The home insurance coverage is intended to give property owners greater control and financial security with the flexibility to sell their homes when they want to “without being hurt by poor real estate market conditions.”

The product has been in development since 2009, when the founders of the company recognized the destructive financial impact that housing market declines have on homeowners and their families.

“While we hope the worst of the decline in home values is over, the uncertainty in the housing market is likely to continue,” said Ryles. The insurance also safeguards values when an unexpected event forces the sale of a home, such as job loss, divorce or death of a family member.