Insuring your home against dangers

On Guam, we know natural disasters. We’ve lived through them before, and we’re going to live through them again. It never hurts to be prepared, especially when it comes to the most expensive asset we’ll ever purchase: our homes.

Financial institutions usually require that you insure your home against major perils, in order to obtain financing for your mortgage. If your home isn’t insured, consider the repair and replacement costs you could incur if an earthquake or typhoon caused significant damage. If you can’t afford to pay for those damages out-of-pocket, it may be time to consider insurance.

Valuing your home

The first thing an insurance company needs to know is how much it will cost to replace your home’s basic structure. If you have an appraisal report, you can provide this to an insurance company, which in turn will provide you with a quote.

If you don’t have a report, the insurance company can send an appraiser to survey your home. The appraiser will measure the square footage of the house and note the quality of the materials used. This appraisal does not include a valuation of the land, or the contents of the house: its purpose is to assess the structure itself.

Assess your needs

There are two components to insuring your home’s structure: third party liability, and perils.

Third party liability insurance covers any injuries that occur on your property, for which you are legally responsible. If you’re having a party and your dog bites one of your guests, this insurance can protect you financially if your guest sues for damages.

You can insure your home against major perils, such as fires, typhoons, earthquakes, and vandalism. You can buy this insurance as a package, or you can choose specific perils, such as typhoons or earthquakes. The exception is fire insurance: structure insurance will include fire protection by default, regardless of what you add.

Qualify for discounts

If you’ve installed typhoon shutters, fire alarms, security systems or undertaken any project to makes your home more safe and secure, you could potentially save on your home insurance. Be sure to alert your insurance agent or broker, and ask if any discounts apply to you.

Check if you have content insurance.

If you bought the required home insurance when you financed your house, you may be under the impression that you are insured against damages to both your dwelling’s structure and your belongings. It’s a good idea to double-check your insurance: structure insurance is usually required, but content insurance is optional.

The cost of content insurance depends on the value of the items in your home. You can choose to insure your most expensive items, and pay smaller premiums; alternately, you can insure all of your belongings, paying higher premiums in exchange for more security. It all depends on your level of comfort.

Go over your policy with your agent or broker.

Under your home insurance policy, certain damages qualify for a claim connected to a natural disaster, while others do not.

For instance, typhoon policies on Guam will cover direct physical damage, i.e. if flying debris cracked a window, or if there’s been a shift in the structure itself. However, damage caused by seepage, such as water seeping under a doorway, will generally not qualify for a claim.

Be sure to ask questions and go over potential scenarios with your agent or broker. A thorough understanding of your policy is a must.

Michael Camacho is the president and chief executive officer of Personal Finance Center. He has more than 18 years experience in retail banking and with financial institutions in Guam and Hawaii.

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