Dear Editor,

News headlines about lower home values no longer are really “news” to most of us. Home values in the greater Phoenix market were down 11 percent in 2010, 15 percent in 2009 and 23 percent in 2008.

For some homeowners seeking to buy or renew insurance for their homes, the declining values may indicate an opportunity to reduce insurance coverages. In reality, the cost of rebuilding the home is the critical factor — not its current real estate value.

No doubt, the economy has everyone looking to reduce costs where they can. But insuring your home for only its market value is a big mistake. It could mean tens of thousands of dollars out of pocket if you had to rebuild.

What has not declined is the cost to rebuild your home should it be destroyed or damaged by fire or other risk. The difference between your home value and rebuilding costs is critical to getting the right amount of homeowner insurance coverage in case disaster strikes.

The right coverage can make all the difference in the world. Reducing coverage to less than adequate amounts invites what we fear most in a recession: an economic disaster such as replacing your home.

Ron Williams
Executive Director
Arizona Insurance Council