The Basics of Home Equity Insurance

Using home equity insurance is something that many homeowners have started doing in recent years. The home equity insurance program is designed to protect you against falling prices in the housing market. While it can be beneficial under the right circumstances, it is not always to your benefit. Here are the basics of home equity insurance and how it works. 

The Program

When a homeowner takes out home equity insurance, they are basically making sure that the value of their home does not fall too low. The company that runs the program uses a housing index to determine whether or not the value of the home is falling. If you sell your home and the index says that the value of your home is lower in relation to what it was when you bought the insurance, then the company gives you a check for the difference. 

Individual Circumstances

The downside to this type of insurance is that it does not cover you on an individual basis. You could still sell your home for less than what you owe and not get reimbursed. The entire program is based on the index instead of a case by case basis. This is appropriate if you feel like your entire local market could go down. 

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