The largest single investment that most of us make in our lifetime is our house. Therefore, it only makes good sense to learn about the policy which protects this investment? a homeowner's policy. The most common homeowner's policy, an HO-3, protects the dwelling against direct risk of physical loss and the contents of the dwelling against about eighteen named perils including, fire, windstorm, hail, vehicles, bursting pipes, and theft. What is specifically excluded is earthquake and flood,

If you wish to add earthquake coverage as a covered peril, many companies will do so for an additional premium and additional deductibles. If you want flood coverage, or if your lender requires flood coverage, you will have to purchase a separate flood insurance policy with its won limits and deductibles. Flood insurance policies are available from many different insurance companies as well as through the National Flood Insurance Program.

Because the cost to rebuild your home with like materials and the same quality of workmanship will increase yearly, you should insure your new home for 100% of the current replacement cost. This will ensure that you will incur no co-insurance penalties in the event of a loss and it will also enable you to have enough money available to replace your home. To keep pace with escalating building costs, your insurance company will increase the limits on your house on an annual basis.

In addition to covering the dwelling itself, the homeowner's policy also covers other structures on the property like garages, walls, fences, storage sheds and swimming pools. Normally, these are covered at a limit of 10% of the replacement cost of the dwelling. This amount may be increased.

Personal property is also included with limits typically from 50% to 75% of the dwelling. However, there are certain internal limits on some classes of personal property such as money, securities, jewelry, watches, furs, silverware, and guns. You would be well advised to schedule certain classes of personal property such as jewelry, silverware, and guns in order to give them broader coverage.

Two very common endorsements to a homeowner?s policy which you should consider are Guaranteed Replacement Cost on the Dwelling and Replacement Cost Contents Coverage. The first will pay to repair or replace your home, if damaged by a covered peril, even if the cost exceeds the liability limits shown on the policy. Many companies will put a cap on this coverage of 125% of the replacement cost of the dwelling. Others still do not cap the limit. The second coverage will pay to repair or replace most of your personal property without deduction for depreciation, subject to policy definitions, exclusions and limitations.

Besides covering your home, other related structures and personal property against physical perils, your homeowner's policy also covers you for personal liability. This covers you and your resident family members for negligent or careless acts of bodily injury or property or property damage which you unintentionally inflict on others. The liability portion of your policy usually starts with limits of $100,000 each occurrence (although higher limits are recommended) and also includes guest medical payments starting at $1,000 per person. Guest medical payments pay the costs of emergency first aid for non- residents of the household who are injured on your premises.

The "typical" homeowner's policy can be custom tailored to fit your individual needs and wants. Insurance agencies that represent many different companies can help you choose the program that is best for you.