bankingHomeowners InsuranceMoses LakeReal Estate November 24, 2009

Interested in Equity Protection


Equity Protection for your Peace of Mind

We have insurance for everything else these days so why not another one for your house!  Except this insurance is supposed to insulate you from the fluctuations in the Real Estate market.  With this they say you can protect 100% of your financial investment in your home.

Formed by a group of Fortune 500 executives they have launched Working Equity Inc  a new form of homeowner protection that has never been seen before.

Homeowners who purchase Equity Protection will receive a payment if their local housing market index declines when they sell their home. When a homeowner purchases Equity Protection, Working Equity uses independent data to determine the local housing index at the zip code level. After a fixed waiting period expires, if the homeowner sells their home and the local housing index has declined, Working Equity will pay the homeowner an Equity Protection payment equal to their home value multiplied by the percentage decline in their local housing index.”

While the actual value of the insurance is a little complicated to determine and it is based on a index created by a third party to the Equity Protection company it doesn’t sound like a half bad way to deal with the declining markets and ensuring that you don’t end up owing more on the property then it is worth in a down market.

Here are the 3 different scenarios they present on their website;

Scenario A: You sell your home for $225,000 – a $25,000 loss:
At the time of sale, the local market index is 90, a 10% decline. Since the local housing market index is down, you receive an Equity Protection Payment of $25,000. 

Scenario B: You sell your home for $265,00 – a $15,000 profit:
At the time of sale, the local market index is 95, a 5% decline. You still receive an Equity Protection payment of $12,500 since the local housing market index is down when you sell. 

Scenario C: You sell your home for $265,000 – a $15,000 profit:
At the time of sale, the local market index is 110, a 10% increase. Since the local housing market index is higher, the Equity Protection contract terminates with no payment.

There are 3 different types of plans available currently:  Lifetime Protection, Flexible Protection, Flexible Term.  The cost they advertise is 1-2% of the purchase price either paid month to month, in installments, or all at once.

It is definitely an intriguing idea but would love to hear from those that have had experience with this company or this type of insurance.