Imagine a homeowner has a loan of $500k. The loan also has a PMI of about 150$. But the home value increases. The homeowner calls the bank to get the PMI removed. The appraised value comes out to 650k.

Could the homeowner's insurance company raise the premium based on the increased home value?

Could the increased home value by 30% cause an increase of 30% in premium?

Note the property is in the US.

  • 2
    It sounds like the title is asking a different question than the body... are you asking if removal of PMI would affect insurance rates; or if increase home value would affect insurance rates? Those are 2 separate questions.
    – GendoIkari
    Commented Jan 29 at 21:28

1 Answer 1


Generally insurance is based on replacement costs, not the value of the property. So if your property is valued at 650K, but to replace it you'd only need to spend 200K on cleanup of debris after fire and rebuilding - that's what your insurance coverage would be.

PMI is insuring against your default on mortgage payments, it has nothing to do with casualty insurance, and is directly related to the property value (and not replacement costs). It should not have any effect on your insurance rates.

  • Or to put it another way: PMI helps guatantee that the bank loan will be repaid even if a disaster strikes, during the period when they have the most at risk; it protects the bank, not he homeowner. Homeowner's insurance helps the homeowner recover/repair/rebuild after a disaster; it does nothing for the bank beyond putting a structure back on the property so they have something worth foreclosing against if necessary. Note that PMI costs can often be avoided it you can make a large enough down payment (historically at least 20%). CAVEAT: All of this assumes US housing/lending markets.
    – keshlam
    Commented Jan 29 at 23:48

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