Home Value Protection Insurance Rolls Out In Oklahoma

Feb. 22--Now you can insure your home against becoming a casualty of the marketplace.

It's a different kind of property and casualty insurance. Ohio-based Home Value Insurance Co. is selling policies to protect homeowners from "the devastating impact of declining home prices." Oklahoma is just the second state where Home Value Insurance is doing business.

The insurance is called Home Value Protection. The state licensed the company as an insurance carrier in December, according to the Oklahoma Department of Insurance. The company was licensed in Ohio in September but has been in the works for two years, CEO Scott Ryles said.

Not for investors

The policies are sold only for owner-occupied, primary residences.

"With Home Value Protection, homeowners don't have to worry that they could lose equity in their home or end up underwater. For a very affordable premium, they can protect themselves from downside risk, while still benefiting from the upside when home values appreciate," Ryles said.

The company started selling policies in Ohio last fall and in Oklahoma this week and is heading to Georgia next, Ryles told The Oklahoman.

Ohio represents "the middle of the road" of the national housing crash with home price declines of $1,600 on average in the third quarter of 2011; Oklahoma has seen light depreciation; and Georgia, specifically the Atlanta area, has experienced high depreciation, Ryles said.

"Until recently, Oklahoma has been fairly insulated from the massive downturn in housing prices," he said. "Oklahoma is the poster child for home prices the last five years."

But he said that kind of Sooner magic could have played its course.

Home values slip

In the past year, Ryles said, the average value of homes in Oklahoma fell by 2.5 percent; in Oklahoma City, the decline was 2.8 percent; and in Tulsa it was 3.1 percent, according to the Fiserv Case-Shiller Home Price Index-Single-Family Aggregate, the home price index that Home Value Insurance uses to gauge the market.

He said that translates to an average loss in value of $3,900 for homeowners in Oklahoma City and $4,100 in Tulsa.

The typical Oklahoma house, he said, could be insured for $20 to $25 per month.

Here's how it works: If home prices decline and a policyholder sells the home for less than the insured value, the policy protects against the loss. Homeowners can lock in an insured value for up to 10 years. Coverage is limited to 25 percent of the insured value.

There is a deductible for the first two years of coverage -- 10 percent of the insured value for the first year and 5 percent for the second year of coverage. Any claim payment during the first two years of coverage is reduced by the applicable deductible. If home values appreciate, a homeowner can purchase a new policy with a higher insured home value.

Realtors dubious

The insurance is too late for Oklahoma City, said Linda Tracy-Ryburn, a Realtor with Keller Williams Realty, 5629 N Classen Blvd.

"Obviously we needed this in 2006-2008 when home prices were at the top of the market and then declined in the last few years. Our market now is stable, prices very good and appraisals conservative," she said. "Personally, if I were a new homeowner in the metro area, I would not buy this. Since the first two years one has a deductible, I feel the forecast shows they will be building equity after that."

Ryles said he's heard that before.

"The No. 1 issue we hear from Ohio is 'Where were you guys four or five years ago?'" he said.

The flexibility the insurance gives for dealing with life complications such as a job transfer or divorce is part of its appeal, he said, and no economic forecast is a sure thing.

Linda Finch, a Realtor with Paradigm AdvantEdge Real Estate, 16301 N May Ave., wasn't too impressed. She said homeowners hurting here are casualties of the excesses of the housing boom more than the subsequent declining market.

"Not sure it would be for anyone here in Oklahoma," she said. "A lot of people who are upside down here probably can't wait two years to sell their home. Some are in trouble because they purchased their home with no money down or took out a second mortgage when all those fly-by-night mortgage companies were doing second mortgages and allowing people to borrow more than their home was worth, which put them in a negative value. My gut reaction is that it is a sucker bet."

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