HOMEOWNER'S INSURANCE

How Much Do I Need?

• You need a large enough policy to protect yourself from loss. This means your policy has to be big enough to cover the replacement cost of the house, not what you paid for it. If you paid $200,000 and the house went up in value to $250,000, your replacement cost to rebuild the same house if destroyed would be $250,000. Thus, you want to make sure your policy is a "replacement" policy so it will pay you the full $250,000. You also want enough coverage to replace all the items in the house such as your electronics, appliances, furniture and other items. Add up what you think your possessions are worth and the replacement cost of your house to figure out how much you need.

  Liability protection is also part of homeowners insurance, which means if someone sues you for injury that occurred at your house, the insurance will pay. So make sure you have enough liability coverage to protect your assets.

What Should My Deductible Be?

• Your deductible is the amount you have to pay if something happens before your insurance starts paying. For example, if you have a $500 deductible, you have to pay the first $500 of any claim. The higher your deductible, the lower your monthly premiums will be. However, make sure you have the money available to pay the deductible should catastrophe happen.

How Are My Premiums Determined?

• Your premiums are determined by the amount of coverage you need, the amount of your deductible and your assessed level of risk. If you live in a neighborhood where things are more likely to go wrong, or in a high-risk area, your premiums will be higher.

  If you have an alarm system or other safety features, your premiums may be lower. The insurance company uses advanced statistical models and risk analysis to determine the chances you'll make a claim and as a result, there is usually not too much room for negotiation in premiums unless you raise your deductible or lower your coverage amount.

What is Covered?

• The exact terms of your policy will determine what is covered. Damage, theft, loss and replacement is usually covered. However, certain types of damage may not be. For example, damage from a flood or earthquake may not be covered, unless you have a separate flood or earthquake policy. In addition, if you have expensive jewelry or art or some other specialty items, the expensive replacement value of the high-dollar items may not be covered unless you have a "rider" on your policy which provides more coverage for a higher fee.