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Parts of a homeowner insurance policy.

A homeowner insurance policy is made of three main parts.

1. The first homeowner coverage part is for the dwelling (structure). You policy will protect the cost to repair or replace your dwelling. This value is set based on the cost to replace your home (replacement value), the depreciated value of your home (Actual Cash Value - ACV), or the Market Value of your home (what you could sell it for today).
2. The second coverage insures your contents/personal property. This section of your policy insures your home furnishings, valuables, etc. This limit is generally established based on a percentage of the coverage for your dwelling. Common amounts are 50%, 70% or 75% of your Dwelling coverage amount. It is a very good idea to be sure you have replacement cost coverage on your personal property.
3. The third part of a homeowner insurance policy covers liability. This area of your policy protects you, however pays a third party. An example of where this policy comes into place would be if someone was injured on your property.

Make sure each part of your plan adequately covers you. Don't forget to review your policy regularly. For example, if your policy places a dollar figure on the cost to replace your home, make sure it adjusts to protect you against rising building costs and inflation.

Sit down with an insurance agent. There is no better way to be sure you are adequately covered. Ask about what coverage has limitations and what additional coverage you can purchase. You don't have to purchase the increased coverage, but this will help to determine what is right for you.