Types

• Homeowners insurance policies include four basic types of coverage; dwelling and personal property damage, personal liability, medical payments and additional living expenses. Dwelling and personal property cover damage to a homeowner's clothing, personal belongings and furniture as well as damage to the structure of the home or other buildings on the property. Personal liability pays for damages or injuries caused by the homeowner or family members to another person. The coverage will also pay for costs associated with defending the homeowner or family member. When a person is injured at a home, medical payment coverage will pay the medical bills of the injured party. This does not cover individuals living in the home. Additional living expenses pay for temporary living expenses when the home has been damaged.
  
  

Actual Cash Value and Replacement Value

• Homeowners should understand the difference between actual cash value and replacement value. Most policies pay replacement cost to rebuild the home while providing actual cash value for personal property. Actual cash value pays to replace personal property minus depreciation. Replacement value pays to repair the damages or replace items with similar kind and quality without depreciation.
  
  

Added Coverage

• Purchase additional coverage for high-cost items. A personal property rider will insure expensive items, which are specifically listed in the policy. Examples of high-cost items include jewelry, fine art, collectibles, furs, electronics and antiques.
  
  

Risk Information

• The insurance company, to determine the insurability of a home, looks at risk factors associated with the home. New policies as well as renewal policies are checked. Some risk factors insurance companies look for are electrical problems, the condition of the property, swimming pools, trampolines, specific breeds of dogs and an excessive claim history. An insurance company can ask about an individual's line of work, leisure activities and specific information about past claims.
  
  

Tips

• Review the policy annually and check for adequate coverage. In addition, document items in the house and the property with pictures or video. Lastly, flood insurance is not included with homeowners insurance and can only be purchased through the National Flood Insurance Program.
  
  

Savings

• Take steps to save money on an insurance policy by shopping around to compare coverage and cost. Higher deductibles and purchasing home and auto policies from the same company can lower costs. Lastly, fire, smoke detectors, burglar and fire alarms help save on premiums.