Home Equity Insurance

Robert Shiller and Allan N. Weiss

No 4830, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Home equity insurance policies, policies insuring homeowners against declines in the price of their homes, would bear some resemblance both to ordinary insurance and to financial hedging vehicles. A menu of choices for the design of such policies is presented here, and conceptual issues are discussed. Choices include pass-through futures and options, in which the insurance company in effect serves as a retailer to homeowners of short positions in real estate futures markets or of put options on real estate. Another choice is a life-event-triggered insurance policy, in which the homeowner pays regular fixed insurance premia and is entitled to a claim if both there is a sufficient decline in the real estate price index and a specified life event (such as a move beyond a certain geographical distance) occurs. Pricing of the premia to cover loss experience is derived, and tables of break-even policy premia are shown, based on estimated models of Los Angeles housing prices 1971- 91.

JEL-codes: G22 (search for similar items in EconPapers)
Date: 1994-08
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published as The Journal of Real Estate Finance and Economics, Vol. 19, no. 1 (July 1999): pp. 21-47.

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Related works:
Journal Article: Home Equity Insurance (1999)
Working Paper: Home Equity Insurance (1994)
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