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Step 1
Decide which type of basic coverage you will need. Your insurance policy can cover your home two different ways. You can buy a policy that will pay you a set amount for your house, in the event of a total loss. That amount is usually the market value of the house at the time it is purchased. Or you can buy a policy that will pay you the house's replacement cost at the time of the loss. In other words, your coverage will take into consideration the appreciation on your house. The second policy is more expensive; but, to many people, it is worth the money.
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Step 2
Determine the risks for which your policy will provide coverage. Certain risks such as fire are quite standard and are offered in basic policies. The next best coverage is called All Risk. It covers most catastrophic events; but, depending on where you live, losses due to flooding, hurricane or earthquake may not be included and you will need to purchase other insurance against such losses.
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Step 3
Specify how you want your basic possessions covered. You can buy coverage based on their cash value or their replacement value at the time of the loss. If you opt for the former, the value of the items covered will be depreciated based on their age and condition, while the insurance company will replace the items, regardless of their value at the time of the loss.
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Step 4
Determine the amount of liability coverage you want your insurance policy to provide. Home-owner's insurance policies provide liability coverage in the event that someone is hurt or sues you for certain damages.
