While some homeowners are tempted to just go with the cheapest insurance that they can find, it really does pay to understand homeowners insurance. To take things a step further, some homeowners simply pay their insurance premiums with their escrow and do not even think about it, that is, until something catastrophic comes their way. Then come those fateful questions: 'What did that actually cover again?' and 'Why did we leave ourselves vulnerable over just a few bucks a month?' It is crucial that homeowners know exactly what they are looking for and what they are paying in order to protect themselves from financial distress down the road. With that in mind, here are the basic types of protection that most homeowners insurance policies cover.

Dwelling Protection. Dwelling protection covers the basic components of your home, namely your walls and roof. The actual building. Dwelling protection typically covers you should these structures become damage due to wind, hail, fire, and smoke, to name a few common problems. For example, should the wind blow a giant tree branch into your roof, your dwelling protection is there to help you pay to fix the problem. It is extremely important to note that flood and earthquake insurance is usually a separate policy that must be purchased. Some homes are required to have flood insurance based on the area where the home is located. This is a good question to ask a realtor when looking for a home, since flood insurance can raise the rates of insurance substantially.

Other Structures Protection. 'Other structures' refer to things which may be found on your property besides your actual house. Things like a detached garage, gazebo, in-ground pool or fence would be covered by this type of protection.

Personal Property Protection. Personal property is anything that is inside your home. For example, if someone broke into your home and stole your TV, you would be covered if you had this protection. One thing that should be considered though is how much your property is worth. Things of great value should probably be insured independently, since insurance companies will offer some money to replace what was lost by theft or fire, it may not be the actual price of the piece.

Liability Protection. Liability covers owners if someone who does not live with them is injured while on their property. Examples include covering homeowners when a neighbor child breaks their arm or leg while jumping on their trampoline. If the homeowner is found at fault, liability protection can help to pay for any medical treatment or legal representation should it be required.