The purchase of a home represents a substantial investment. Unfortunately, like many other investments, its value is contingent on outside factors. Your home’s value is directly affected by the health of the housing market. If you need to sell during a downturn, you could see your home go for a much lower price than you paid. To help safeguard your investment, home equity protection takes the value of your home at the start of your policy and, when it comes time to sell, will cover the difference if market factors cause your home to lose value.
In recent history, the housing market has taken a significant hit, with no guarantee that the worst is over. While the market goes up and down naturally, you may not always have the option to wait for improved market conditions before selling. In situations like this, a down market can translate to a significant loss on the sale of your home.
You can’t predict what the condition of the housing market will be when it comes time for you to sell. However, with home equity protection you can make sure your investment will hold its value even if you have to sell during the worst of times.
Home equity protection takes the current value of your house at the time when your policy starts and establishes it as the protected value, and will not be covered under your general liability insurance.When you sell your house, if market factors cause its value to decline, you are eligible to file a claim under your home equity protection coverage. It's especially important to check your homeowners insurance Chicago residents! Leases and other important documents can be held with it, and you don't want to be caught off guard with any loopholes in a time of need!
When filing a claim, two requirements commonly apply:
Your home must sell for less than its protected value.
- The average market value of local homes must have declined as reported by an independent home price index.
The final amount that you can recoup from a home equity protection claim is based on the difference between the protected value of your home and the percentage that the local home price index has declined.
Policies may have some exceptions that you need to be aware of. Commonly, a drop in market value due to acts of war or terrorism or localized disasters, such as flooding, hurricanes or earthquakes, may be excluded as triggers for claims against the policy. To understand the difference between the market value and replacement cost, click here: Market Value vs. Replacement Cost. As always, it is important to review your policy with your broker to make sure you are getting the coverage that you need.
If you have questions or concerns on this issue, do not hesitate to call Zeiler Insurance and speak to one of our customer service representatives. As an independent agency, Zeiler Insurance prides itself with quality customer service for the people of the Chicago-land area and the rest of the Midwest. Customer or not, we can review your insurance and see if you are being protected appropriately for the right price.