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.


Planning for your car insurance costs

Slick roads, sharp turns, sheer physics: a car accident can happen at any time, regardless of how careful you are. The Guam Code Annotated and lending institutions require car owners to purchase insurance to protect against the risk of an accident, by setting minimum limits for required coverage. It’s important to understand these limits and the role they play in your overall financial plan.

Liability Insurance: Bodily Injury

In order to register your vehicle, Guam law requires that you purchase at least $25,000 per person and $50,000 per accident bodily injury liability insurance.

If you are in an accident, and you are at fault, this insurance will cover hospital bills for a third party: the driver of the other car you hit, or a bystander injured in the accident. The $25,000 figure is the limit of funds that your insurance company will pay out per person. If multiple third-party individuals were hurt, the maximum that this policy pays out is $50,000 for the entire accident.

If you have room in your budget, you may want to consider adding coverage for this component of your insurance. If you’re involved in a catastrophic accident, those hospital costs can be immense. If you have assets to protect, additional coverage will prevent you from having to liquidate those assets to cover the difference.

Liability Insurance: Property Damage

Guam law mandates that you retain at least $20,000 worth of property damage liability insurance. If you’re involved in an at-fault accident, and the other car is totaled, $20,000 is the maximum that the insurance company will pay to the other driver.

Just keep in mind: there are cars on Guam’s roads that cost more than $20,000 to replace, in the event of a major collision.

Comprehensive and Collision Coverage

While Guam law doesn’t mandate comprehensive and collision insurance coverage for your own vehicle, financial institutions often set minimum limits before they finance your car loan. Even if you purchased your car with cash, you should still consider protecting yourself from hefty replacement costs.

Your Vehicle: Comprehensive Coverage

Comprehensive coverage covers any non-moving damage to your vehicle. As long as the car is parked, theft, fire, falling objects, or any other damage would be covered by this policy. If you installed any anti-theft features, check for discounts

On Guam, comprehensive coverage usually doesn’t include typhoon coverage. Check with your insurance company to see if you are covered, and if not, ask for a quote. Typhoons are unpredictable, and a typhoon that lingers and intensifies can end up flooding your car or flinging debris into your car’s windshield.

Your Vehicle: Collision Coverage

If you get into an at-fault accident while your car is in motion, collision coverage will pay for damages to your car.

Both comprehensive and collision coverage will probably involve deductibles, which you’ll need to pay before your insurance policies pay out. If you have a $200-$200 policy, you’ll need to spend $200 out-of-pocket in order to fully repair your car.

The higher your deductible, the lower the cost of your monthly premiums, and vice versa. You can adjust your deductible based on what you can pay, but be sure to have that deductible amount saved up for a potential accident.

Optional Coverage

Insurance companies also offer separate policies for medical payments and protection against uninsured motorists. Just be sure that your policies don’t overlap, and that your overall coverage is set at a limit that you feel comfortable with.

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.