If you’re a homeowner, chances are your house is worth less than it was five years ago. But you could be paying the same or more to insure it.

You pay insurance for the cost of rebuilding a damaged home.  The price of a home is based on the market value of that home and the land it’s on.  And despite the deep housing bust the last few years, the cost of rebuilding has not changed.

After rising almost 62% between 2000 and 2007, the average premium for homeowners insurance did drop by nearly 4% in 2008, according to the National Association of Insurance Commissioners.  But that drop wasn’t due to a drop in the cost to insure a home, but because homeowners were either decreacing coverage or increasing their deductibles.

With the poor economy and high unemployment rates, people are doing anything to save money.  But this could be a costly mistake.  When you see your home value going down, don’t assume you can drop the value of your homeowner’s insurance.

Raising deductibles can be costly because if you do have a claim, you’ll have to come up with more cash yourself.  You should also be careful when reducing your coverage.  The insurance usually must be enough to cover how much is owed on the mortgage, even if that is more than the value of the home.  Unfortunately, because of the economy, it’s possible to owe more on your house than you could sell it for.

But this doesn’t mean you should accept an increase in your insurance rate.  Look at your bill to see why it has increased.  You may want to check if your premium can be reduced by making home improvements such as adding a better fire prevention system, or making lifestyle changes like quitting smoking.

While low insurance prices are alluring, be cautious in accepting a new policy based on price.  It’s important to make sure you have adequate coverage and that your carrier will treat you well in the event of a claim.

Information from MSNBC.com.