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.