Should You Get a Down Payment Insurance?

Posted by Staff Reporter ( on Apr 18, 2016 06:32 AM EDT
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Residents Count The Cost Of Their Flooded Homesmore big
MOORLAND, UNITED KINGDOM - FEBRUARY 18: Derek Bristow, 64, poses for a photograph with an aerial view of his property and land as he stands in flood water currently surrounding his house in the flooded and largely evacuated village of Moorland on the Somerset Levels on February 18, 2014 in Somerset, England. Insurance bosses met with government ministers in Downing Street today to discuss their response to the continuing flooding, which has affected many parts of southern and south-west England and areas along the River Thames. (Photo : Matt Cardy/Getty Images)

Certain insurance policies are made available to ensure that a person can still be able to get through in the case of a sudden or unexpected situation. While there are different types of insurance policies, should you consider insuring your down payment in case of a housing crash?

Many homeowners are still recovering from the housing crash in 2008. A lot of homeowners lost a high percentage of their money in their real estate assets because of this.

While one can never predict when a housing crash will hit the U.S. again, notes that startup company ValueInsured recently introduced the concept of a down payment insurance. The insurance is called +Plus and it is said to help provide homeowners with some sort of reassurance in case of a market crash.

Investopedia notes that a down payment is "a type of payment made in cash during the onset of the purchase of an expensive good/service." In the case of the real estate market, a down payment serves as one proof that you are serious about buying the property.

However, a housing crash may affect how much you will end up getting when the time comes for you to sell. Aside from this, homeowners may also get less than the amount they bought their house for when they suddenly need to move to a new home, years later.

The aforementioned publication discussed the pros and cons of getting a down payment insurance. While the concept of the insurance aims to recoup the costs of the down payment, the publication noted that there are certain conditions to this policy.

The insurance dictates that homeowners need to wait two years before filing a claim. Also, homeowners are only insured for up to seven years after closing.

Home values are also determined by the federal housing index, which means that homeowners may not be able to recoup the entire down payment. However, several real estate agents are encouraging homeowners to get one, especially for those who are offering more than the asking price.

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