Published: Tuesday, 27 Oct 2009 | 12:51 PM ET

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Home prices have declined -- in some markets as much as half what a property might have sold for two years ago. So why haven't homeowners insurance bills fallen as well?

Insurance experts are quick to point out that insurance is not based on the market value of property, but on the cost of rebuilding the property after it is destroyed. That cost includes not only labor and materials to rebuild, but also the cost of demolition and the removal and disposal of things that can't be reused.

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"Market values are decreasing, but the cost to replace has gone up," says Elaine Baisden, vice president of national property for Travelers Insurance.

That said, homeowners insurance might not have to be as pricey as your insurance agent would like it to be. Consider these homeowners insurance basics, as well as some ways to trim its cost.

3 types of coverage
Guaranteed replacement coverage, which insures payment of 100 percent of your repair or rebuilding costs without limits, is the holy grail of homeowners insurance. Your agent will likely recommend it, and so does most consumer advice. You may have to buy it if your mortgage lender requires it. And you may want it if you would replace your home -- should it be destroyed -- exactly the way it is now, and you can't afford any economic disruption. But this kind of insurance is very expensive.

Replacement cost coverage isn't quite as good or pricey, but it is the best some homeowners are able to buy because of their home's location or condition. And it is probably good enough for many people. In these policies, the maximum the insurer will pay if your home is destroyed is stated in the policy.

A cash-value policy will cover the cost of the house's replacement cost minus any depreciation or wear and tear. You can count on not getting enough money to completely rebuild with this type of policy.

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Figure out replacement cost
If you want or need replacement cost homeowners coverage, then you must insure for a minimum of 80 percent of the cost of replacement as determined by your insurer. This is an industry standard.

Travelers' Blaisden points to AccuCoverage.com as a good source for determining your home's replacement cost as calculated by your insurer. All insurance companies use software from AccuCoverage or a competitor to calculate replacement costs.

For $7.95 per property, you can fill out AccuCoverage's questionnaire on the size and amenities of your home. When you are finished, you'll get an analysis of the cost of rebuilding the exact property in your location. Compare it to what your insurer estimates to be your replacement cost. If it is more -- because you haven't reported improvements to your insurance company, for example -- you should do that. You don't want your insurer to find out about these improvements after a disaster and use your negligence as an excusive to avoid payment.

If the calculator says the replacement cost is less than your insurer calculates (or about the same), go back to your insurer and ask for a recount. "I challenge the replacement value every time I'm billed," says Jay Henry, an exclusive agent for Allstate in St. Louis Park, Minn.

Next: What coverage do you need?

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