For most people, the home you live in is the most valuable asset you possess and your single greatest investment. Whether you own or rent, your home provides a place where you keep your families and belongings safe. A homeowner's insurance policy provides the assurance that, if you were to suddenly lose your home or its contents, you would be able to start over. A stipulation of your mortgage is that you carry a certain amount of homeowner's insurance. But don't stop here; you may want to have more coverage than your mortgage lender requires to fully insure your house and possessions. Even if you own your home outright, the dwelling and its contents need to be insured. Take the time to identify your insurance needs very specifically, and obtain the most coverage possible for the lowest premium. See the Insurance Information Institute website for statistics about homeowner's insurance premiums in the United States.

Homeowner's insurance policies provide coverage against different types of disasters, or in insurance-talk, perils. Perils are a defined group of potential damage-causing events that may, or may not, be covered by the policy you choose. Generally, perils are separated into two groups totaling 17: one group of 11 perils and an additional, second group of six perils. Later in this article, the relationship of perils to the differing types of policies is explained more fully. The first 11 perils are:

• Fire or lightning
• Windstorm or hail
• Explosions
• Riot or civil commotion
• Damage caused by aircraft
• Damage caused by vehicles
• Sudden or accidental damage from smoke
• Vandalism (sometimes called malicious mischief)
• Theft
• Volcanic eruption
• Damage by glass or safety-glazing material that is part of a building

Depending on your coverage, you may be covered for the above 11 perils, plus these additional six perils:

• Falling objects - damage occurring from objects falling from the sky (meteorites, airplanes, etc.)
• Weight of ice, snow, or sleet
• Three categories of water-related damage from home utilities or appliances:
• Accidental discharge or overflow of water from plumbing
• Freezing of plumbing
• Sudden and accidental tearing, cracking, burning or bulging of a steam or hot water heating system
• Electrical surge damage

There are six basic types of policies used today that are considered standard throughout the insurance industry. All of the policy types include liability coverage, and exclude flood and earthquake coverage. The differences in these policies relate to the perils they cover:

The HO-3 type policy is the most common in use, with over 80% of all households in the United States in possession of this broad risk insurance, according to the National Association of Insurance Commissioners (NAIC). Visitwww.NAIC.org for consumer information about homeowner's insurance, including reports of complaint and financial data for insurance companies in the United States.

When you think of homeowner's insurance, you may tend to focus on insurance providing coverage for your property (structures and possessions). Another important aspect of your homeowner's policy is liability insurance. The liability portion of this policy covers personal injury suffered by others when, for example, your dog bites a neighbor or someone slips on your snow-covered front steps. Your liability insurance will cover any medical or legal costs that may arise from such incidents. Also, see the Georgia Insurance Information Service Homeowner's Insurance Factsheet for advice about your homeowner's insurance policy.

Umbrella policies are available to provide additional liability insurance, if needed. An umbrella policy is supplemental to both your homeowner's and automobile policies and will protect you in the event someone attempts to go after your home or other assets to pay for damages. Talk to your insurance agent about whether an umbrella policy providing additional liability coverage is a good decision for you. To learn more about umbrella liability coverage, see the umbrella policies article in the CareOne Credit Knowledge Center Library.

Homeowner's insurance is comprehensive in nature, and you'll find that it covers a broad array of losses, including the loss of personal property when you are away from home. There is considerable peace of mind in knowing that your lost or stolen luggage containing hundreds of dollars worth of clothing and possessions is covered by your homeowner's insurance policy, even though you are miles away from home. While every policy is a little different, the same basic coverage - property and liability - is a basic part of policies. Check your own policy to confirm your coverage.

Another facet of your insurance policy is the amount of your deductible, or the amount you pay out-of-pocket each time you make a claim against your policy. Remember that the broader the coverage, the higher your premium. One way to lower the overall cost of you policy is to raise your deductible. But you'll want to select a deductible amount you will be able to afford to pay if disaster strikes.

You may be surprised to learn that most homeowner's policies cover nearly every possible disaster or loss except those caused by floods and earthquakes. Examine your policy to see if any other coverage is needed to protect you from catastrophe. Depending on where you live, the expense of coverage for flood and earthquake insurance will vary. Find out how susceptible your region is to flooding and earthquakes before you make any decisions about this additional coverage. Your mortgage lender may require you to maintain flood coverage if your property is in a flood plain management area, as established by the National Flood Insurance Program (NFIP). See the U.S. Federal Emergency Management Agency (FEMA) website www.floodsmart.gov for more information about the NFIP. There are other exclusions that may specifically impact you and your coverage.

Your policy covers more than just the person listed as the primary insured. Under the coverage for personal property and liability, others may be covered including: your spouse (if he/she is not listed with you as primary insured); residents (your children or anyone else residing in your home under the age of 21 in the care of any member of your family); employees (housekeepers, au pairs, or gardeners); or guests and other visitors, provided you contact your insurance company to request coverage.

Homeowner's insurance is one of those tpoics that make you think about the unthinkable. You don't plan these catastrophic events; they just happen. And if they do, it's too late to start making plans or wondering about your coverage. An important step for any homeowner or renter is learning about the insurance that will bring peace of mind. Take the time and do your homework now. If anything happens to your home, you'll be glad you did. For more information on homeowner's insurance, see the State of Arizona's Frequently Asked Questions About Homeowner's Insurance.

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• Saving Money on Homeowner's Insurance - Have you given your current policy its annual checkup? You can do many things to properly price-shop your homeowner's insurance to get the best deal for you. Beyond deductible choices and filing claims, personal habits, amount of time spent in the home, home features, and using your current auto insurance provider are all ways to get bonus points on your homeowner's insurance, resulting in a lower cost to you. Maximizing your coverage this way can help with your debt management and financial planning efforts by lowering premiums, giving you more money to invest in your overall financial plan.
  
  
• Is All Your Inventory Protected? If you aren't storing your most prized and valuable possessions in a safe deposit box, it's wise to take detailed inventory in your home. When you file a claim due to fire or burglary, for example, your insurance carrier typically wants proof of the value of the items you are claiming as gone before reimbursing you. It's easy to videotape or notate your personal inventory, starting with the most valuable items, and store this information in a safe place should the unfortunate occur.
  
  
• How Much Protection is Your Homeowner's Insurance Really Providing You? When deciding how much coverage to purchase, appraise the items in your home. Insurance carriers will use either appraised or replacement value when reimbursing your for damaged or destroyed items. If you underestimate the value or your possessions, you may not get back enough to replace them. Do this before purchasing the coverage as part of your overall financial plan to ensure that the premiums you pay are really protecting your personal items.