Because a home is one of the largest investments you will ever make, you need to insure it against severe damage or a total loss. A home insurance policy provides financial coverage if your home is destroyed in a fire or vandalized, or if you have personal property stolen. When you obtain a home insurance quote, there are several aspects that all homeowners must know. The following three important facets should be kept in mind when purchasing homeowners insurance.

When you purchase a home insurance policy, you should always insure your home for the replacement cost. The replacement cost is the amount that it would cost if you have to rebuild the home after a loss using similar materials at today's prices. You should also review your policy each year at renewal to make sure that the limits are up to date because labor and material costs are always on the rise. If you insure your home for a certain amount and you need to rebuild because of a loss, the full cost of the rebuilding may not be covered if your limits are too low. Another option is replacement based on the actual cash value of the home. In this case, the insurance company will use the value of the home minus depreciation. This option is usually less expensive, but not as beneficial to the homeowner.

Perhaps the biggest fear of homeowners is losing everything they own in a fire. However, the reality of things is that most home claims are made for much smaller and less expensive reasons. Most claims are considered to be partial losses rather than total losses. This is good news in one way, but if your home in underinsured, then it may actually be detrimental. A home insurance quote is largely based on the value of the home; therefore, the more expensive your home is, the more the premiums will be. Some home owners deliberately understate the value of their home to receive cheaper insurance rates. In a partial loss, this means that they would be penalized and would not be covered for the full amount of the claim.

A home insurance policy will cover your home, detached structures and your personal property. It does not cover the land that the home sits on because the land cannot be damaged by fire or any other perils covered in the insurance policy.

Providing honest and accurate information to your insurance company is the best way to ensure that you are receiving adequate insurance to cover your home. The above-mentioned important facets will give you peace of mind if you ever need to file a home insurance claim.