Homeowner’s, title insurance both necessities

This was originally published on Monday, April 21, 2014, in the Pacific Daily News.  Click here to subscribe to the PDN.

Question: I am about to purchase my first home but need advice on homeowner’s and title insurance.

Answer: Congratulations on your new home! Buying a home is a huge responsibility and probably going to be one of your largest expenses. When buying a home, it’s important that both insurances are used to cover your property and home.

Title insurance ensures that the property which you are buying is free and clear of any legal issues with regard to ownership of the property.

This covers back property taxes, omissions in deeds, clerical errors and fraud. Title insurance is available for lenders as well as the owners. Lenders require a lender’s title insurance policy to protect it while there’s a loan. If you obtain a mortgage, a lender’s policy is based on the loan amount. Once the loan is paid, the lender’s title insurance ceases. This is why an owner’s title insurance policy is critical. As long as you own the property, the owner’s title insurance policy will be in place. You have the right to choose your title insurance company. Be sure to choose a company that has a good reputation and you feel will be in business for years to come.

Homeowner’s insurance is a necessity to protect you financially. Like most insurance it can be difficult to understand. Many do not read their coverage until they have a claim. Understanding your insurance policy will ensure that you can rebuild your home and replace your belongings in case of a loss. Depending on what type coverage you have, your policy may cover your home and/or personal belongings in the home, such as appliances, furniture, etc. Here are two homeowner’s insurance options on the structure:

• Replacement cost pays you the cost of replacing the home up to the insured amount. Usually, there’s no deduction for the depreciation of home and is based on the face amount of the policy; and

• Actual cash value covers the cost to replace your home minus the depreciation cost at the time of the loss.

Once you decide which homeowner’s policy is best for you, there are other options to consider:

• Contents or personal property coverage covers the valuables within your home. It will reimburse you the depreciated value for clothes, furniture, appliances, electronics and more. Theft and burglary of property are covered under this option.

• Personal liability covers you for bodily injury and property damage claims that occur on your property.

• Medical payments helps pay medical expenses for those who are injured on your property.

• Temporary housing eases the burden of living in a place until your home is rebuilt.

Check with your insurance company to see what kind of disasters are covered. Usually, homes that are in flood zones, earthquake zones or typhoon zones may require special insurance to cover those disasters.

Know exactly what you are buying and ask questions about your policy. Work with your insurance representative to help you find an insurance policy that fits your needs and budget.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

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Know the value of your house, the things in it

This was originally published on Monday, May 20, 2013, in the Pacific Daily News.  Click here to subscribe to the PDN

Typhoons and earthquakes are two common disasters in Guam. Some areas are prone to floods or fires. Disaster preparedness is essential. Ensuring that your family, home and finances are safe should be a top priority.

For the past two weeks, I discussed homeowners insurance.

Try to get the most out of your homeowners insurance. One of the most costly purchases you may make in a lifetime is your home. Keep in mind construction costs will probably continue to rise, so make sure you have enough coverage to repair or rebuild your home in case of damage or a disaster. Read your policy carefully and know what it covers and its financial limits.

Your homeowners insurance policy should be reviewed yearly.

If you have made any upgrades, remodeled your home or added onto your home, be sure to contact your insurance company as soon as possible.

Keep a list of your household items up to date. Record your electronics’ make, model and serial number. Keep receipts when purchasing computers, couches, appliances and other large purchases. Having a record of what is in your home will make it easier to file a claim. Reassess your house every few years to ensure your policy covers the true value of your home.

If you are renting, you also should purchase insurance. The owner’s insurance covers only the structure. To protect your belongings, consider renters insurance. Renters insurance also protects the tenant from being liable for an accident that’s not covered by the owner or landlord’s policy.

Keep records safe

Think about keeping all your important records in a safety deposit box. These should be hard to replace documents such as birth certificates, marriage licenses, divorce decrees, wills, passports and so on. Keeping them at home subjects them to fire, flood or theft. Make two copies of each document and keep one with your lawyer or a trusted relative or friend. The other copy you should keep in your emergency kit or a safe in your home.

Your emergency kit should be something that is small enough to handle in case you need to leave your home quickly. Keep it in a waterproof container or a large two gallon zip locking bag. In the container, keep a small amount of cash to stay at a hotel and eat for a few days.

Remember when the power goes out, ATM machines don’t work. Some of the bills should be in small denominations in case you need to purchase small items from your neighborhood store. If banks don’t open, the stores cannot get small bills to make change. Along with cash, don’t forget your insurance cards and copies of prescriptions in case you need medical attention. It is a good idea to also keep a CD/DVD with scanned copies of your important papers in the emergency kit.

These are just a few ideas to keep you ready for the unexpected. You may never be totally prepared for a disaster, but it is comforting to know that if a disaster strikes, you have the keys to start and rebuild if necessary. Other ideas to keep you safe can be found at www.ready.govhttp://www.redcross.org/prepare, and http://www.fema.gov.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and with financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

 

Understand what your homeowners insurance covers

This was originally published on Monday, May 13, 2013, in the Pacific Daily News.  Click here to subscribe to the PDN.

Homeowners insurance is something most people don’t think about until they need it the most.

It is important to understand what your policy covers. Will it pay enough money to rebuild in case of a disaster? If you are unsure your broker or agent should be able to go over your policy with you. Homeowners insurance can be very expensive and you should know exactly what you are buying.

There are three levels of homeowners insurance coverage:

Actual cash value. This will pay to replace your home, but it will be net of depreciation cost. It is important to know that with this policy, you are paid what the structure or item in the home was worth when you purchased it, less depreciation, not what it cost today to replace it.

Replacement cost or value. If your home is partially damaged or fully destroyed, your insurance company will fully replace or rebuild your home, without deducting for depreciation, up to the amount of your policy limit.

Most homeowners insurance policies cover:

  • Personal belongings. Coverage for loss or damaged furniture, appliances, and other belongings within your home by an insured disaster, burglary, theft or vandalism. It may also cover theft if your home is broken into. Be familiar with the limit your insurance covers. You should inventory all valuables in your home. If you have really priceless or expensive items, consider purchasing a separate policy that insures the item at its full appraised price.
  • Damage to your home. Most policies will pay for repairs to the exterior and interior of your home. Know what types of disasters are covered. In Guam, the typical homeowners insurance plan covers fire, earthquake, vandalism and typhoons. Damages from floods are usually not covered in the typical homeowners policy and may require a separate policy.
  • Liability. This is an insurance policy that protects the homeowner from being sued or legally liable of negligence or injury. Let’s say you have a visitor who slips in your home and is injured. Your policy will cover their medical expenses and any legal costs. Some policies may even cover you and your family from financial responsibilities when you are away from your property. The typical coverage covers up to $100,000, but can be increased. Ask your agent how much it will cost to increase your liability.
  • Temporary living. If your house has been completely destroyed or is damaged to the point it is uninhabitable, some policies will cover your hotel or rental costs until your home is rebuilt or repaired.

 

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and with financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

Homeowners insurance protects your investment

This was originally published on Monday, May 6, 2013, in the Pacific Daily News.  Click here to subscribe to the PDN.

 Question: I am in the process of buying a house. What disaster planning should I be thinking about?

Answer: As you go through the process of buying a home, you’ll realize the responsibility that comes with home ownership. Many of those responsibilities may have been taken on by the renter or landlord of your last home.

Your first step to being prepared for a disaster should be to start researching homeowners insurance policies.

A homeowners insurance policy protects you and your home. Your policy can cover you from man-made and natural disasters, theft, bodily harm of others while on your property, and so much more. You can also specifically insure the contents of your home as most homeownership policies don’t cover those specific items. Shopping around for a policy can be quite confusing and should not be taken lightly. Insurance policies can be long and confusing but it will benefit you to understand what coverage you need.

Find an insurer

Talk to co-workers, friends, and family members about what insurance company they use. The types of policies and coverage vary from company to company.

Call several different companies and set up an appointment to get quotes. Have an idea of what type of coverage you want before visiting.

Get three to four quotes from different companies to find which one will fit in your budget and provide you with the best coverage.

Many insurance companies offer discounts if you sign up for a bundled package of home, car, and life insurance.

Your home

Take a look around your home. Are there safety measures that you use to protect your home? Typhoon shutters are a great way to protect your home during typhoons.

Are there fire extinguishers or alarms strategically placed throughout the house? Do you have a security system to deter theft?

Make a list of these security items and bring it along with you when you shop for quotes or provide this information to your broker. These safety measures can lower the cost of your premiums. Ask the agent what other safety measures you can use to further bring down your costs and protect your home.

In Guam, earthquake damages are but flood damages aren’t typically not covered by a standard homeowners policy.

If you are located near the ocean, a river or in a low lying area you may be at a high risk for floods. You may have to pay for a flood insurance policy. Your home’s location can determine how much you pay or if you need extra coverage. When shopping for an insurance policy, discuss your home’s location to get an accurate quote.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and with financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.

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.

Protecting yourself with insurance

In looking after your personal finances, one of the smartest things you can do is protect yourself against massive financial loss.

Think about the largest purchases you will make in your life: your home and your car. If either suffered damage from an earthquake or a collision, you’d need to pay the repair or replacement costs, just to keep your life running. Those costs can stretch into thousands of dollars, emptying your bank accounts and sending you into debt.

Insurance policies can protect you against those high and unexpected costs, in exchange for premiums that you pay on a regular basis. In effect, you trade unpredictability — in the form of typhoons, earthquakes, fires, vandalism, theft, and collisions — for smaller, predictable payments. In some cases, the law mandates that you buy insurance. In other cases, the financial institution that lends you money for your home or car will require the purchase of insurance, before you sign the final papers.

We’ll talk more about home and car insurance in upcoming columns. But for now, here are a few tips to help save you money and stress, before an emergency occurs.

What’s needed

Insurance can pay for itself several times over after a disaster, but you also don’t want to buy more insurance than you need. What you decide to cover, beyond what is mandated by law or your financial institution, depends on your assets and your comfort zone.

There are two major components in home and car insurance:

  • Third-party liability: Your legal responsibility to pay for damages, if your actions or negligence cause injuries or property damage to a bystander; and
  • Replacement costs: The cost of replacing your belongings in the event of a collision, natural disaster, fire, or theft.

Beyond mandatory limits, you can decide how much coverage you need. You should think about for what risks you need to insure yourself, and what you can afford to pay out- of-pocket if disaster strikes. Start with the belongings that you would absolutely need to replace, and work from there.

Keep good records

You should keep copies of your insurance policies, receipts, photographs, and other necessary records somewhere safe and easily accessible.

Try to keep back-up copies with a trusted relative, in a safety deposit box, or on a secure online storage site with hefty security. If anything does happen to your home or car, you’ll save yourself stress by knowing exactly where to go next.

Save for deductibles

If you insured your own belongings, and you need to file a claim, chances are that you’ll need to pay a deductible before your policy pays out the remainder of its coverage. If you have a $300 deductible on your car’s collision insurance policy, and an accident on Marine Corps Drive leaves you with $1,000 worth of damage, you’ll need to pay $300 out of your pocket before your insurance covers the remaining $700.

Out-of-pocket expenses for replacing or repairing your most important belongings are just one reason for having an emergency fund. Double- check the deductibles on all of your insurance policies, and make sure you have enough to cover them, so that you’re totally prepared when life delivers the unexpected.

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.