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Home Insurance Question from Hialeah, Florida
Answer given on May 17, 2019
Homeowner insurance is based on the replacement cost of the home. Building costs for the area times the square footage. Market value does not always match replacement costs. The HELOC is a part of the market value of your home, so it should not have any effect on your insurable value, presuming you are properly insured for replacement cost.
Check with your insurance agent to be sure you are properly insured to value for the replacement cost of your area. This is not an area to cut corners to save money. The catastrophic fires, tornados and other disasters prove that homes can become a total loss very quickly. The biggest problem for these disasters are the fact that people are underinsured. Don't just rely on the insurance agent. Get costs per square foot from a local contractor to be sure you are properly insured. Think of a higher deductible to save money. Once you are properly insured the HELOC will have no effect on your insurance costs.
NOTE: The IMPORTANT NOTICE below is a part of this answer!
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