Ready to gamble that your home value will tumble more?

Queasy-stomached home owners who can't bear to watch the equity in their homes continue to dwindle have an option: Equity protection policies. These policies, will, for a fee that generally ranges from 1% to 3% of your home's equity, guarantee against further losses when it comes time to sell.

Most of the policies work like this: At the time the contract is purchased, the company takes a snapshot of the average home price in the customer's ZIP code. If, at the time of sale the ZIP Code property value has declined, the company would make up the difference -- in most cases, less a 10% "deductible."

Each of the three companies that offer the policies have different rules and exclusions, so it is wise to compare.

The equity protection agreement isn't considered an insurance product and is not covered by insurance regulations in most states. In fact, the policies are more closely likened to a put option, which protects a stockholder against the price of the stock dropping -- meaning you are betting that a stock, or in this case, your home price, will drop.

The third equity protection product just hit the market, offered by Working Equity Inc., a San Francisco-based company. It works like this, according to Finance Magazine: "Homeowners who purchase Equity Protection will receive a payment if their local housing market index declines when they sell their home. ... Working Equity uses independent data to determine the local housing index at the zip code level. After a fixed waiting period expires, if the homeowner sells their home and the local housing index has declined, Working Equity will pay the homeowner an Equity Protection payment equal to their home value multiplied by the percentage decline in their local housing index."

Here's my question: Since insurance companies prey on our fears and calculate the odds that our fears are unfounded, here is a program that is preying on the fears of home owners that the housing market's precipitous fall isn't over. So wouldn't common wisdom say if this is a smart business, the writers of these policies must think the market bottomed out and they stand to make money? I'm just saying ....