A homeowners insurance policy is basically a contract you make with an insurance company. In exchange for your premium, the insurance company will pay for financial losses related to your home or your property during the period of the contract. The insurance company also agrees to pay for damages resulting from injuries or damage to other people for which you are held legally responsible. When you're searching for homeowners insurance, you'll want to shop for the type of policy that will fit your needs best, with adequate protection for your valuable possessions and supplemental coverage to protect against natural disasters that are not covered in your basic policy. If you're like most people, the owner of the mortgage of the home will require homeowners insurance.

Types of Home Insurance

Home insurance can be broken down into 7 basic types of plans. What differentiates them from one another are the types of circumstances they cover. The most popular plans today involve #2 and #3.

Basic homeowners insurance covers 11 types of disasters:

aircraft, wind/hail, explosion, riots/civil unrest, fire/lightning, vehicles, volcano eruptions, vandalism, theft, smoke, and self-damaging instances (part of building falls on itself, etc.).

This list can be expanded to include 6 more disasters:

falling objects, water damage (3 sub categories), snow/sleet/ice, and electrical surge damage.

1. This is the basic homeowners insurance that covers your home and property against losses due to the 11 disasters listed above.

2. This plan includes #1, in addition to more specific disaster circumstances: snow, falling objects (like trees), water damage (i.e. washing machine overflows, or dishwasher breaks), and electrical damage (power surge).

3. This plan includes extended/specialty items, in addition to all of the above. The only disasters that this doesn't cover are flood, earthquake, war, and nuclear blasts.

4. Renters insurance coverage. This type of insurance will protect your personal property for the above listed items.

5. Complete risk coverage for the building and property.

6. Condominium coverage. This type of policy covers personal property from the above disasters (all 17).

7. This policy is designed for older homes with historic value. Coverage includes protection from the basic 11 disasters listed above. Under this plan, coverage is limited to repairs or cash values of the items involved. The rebuilding/replacement cost is not covered in this, because some aspects of the home (historic significance) can make these costs higher than current market value.

There are variations that can be had with all of the above plans. There are special policies that can be used to cover mobile homes. Opposite of renters insurance, which only covers the renters property, there is landlord insurance. This covers the actual dwelling, but not the property within.

One should consult with a qualified insurance professional prior to implementing any insurance strategies.