1. My homeowners insurance is part of the payment I make each month to the mortgage company. Who decides what insurance to get?

You do - it is your home and your insurance policy. As a means of protecting their investment, the mortgage company collects a set amount from you each month, puts it in escrow, and then pays your insurance and taxes when they fall due. However, the policy is still yours and you may select the insurance you feel offers the best coverage at the best rates. In fact, if you allow the mortgage company to choose, you might well end up paying more for your homeowners insurance.

2. What kind of perils am I protected against?

Remember that policies vary but homeowners insurance usually covers damage to both structures and personal property caused by:

• Fire or lightning
• Windstorm or hail
• Explosions
• Riot or civil commotion
• Aircraft
• Vehicles
• Smoke
• Theft or vandalism (sometimes called malicious mischief)
• Falling objects
• Weight of ice, snow or sleet
• Freezing of a plumbing, heating, air conditioning or other such household system

In fact, your coverage is most likely even more comprehensive than the above list. Many homeowners policies cover damage by "just about everything," unless the coverage is specifically excluded. In these cases, it is even more important to understand what is not covered.

3. What about floods, earthquakes and other catastrophes?

Most catastrophes are covered; for example, wind damage from hurricanes and tornadoes come under the windstorm peril listed in the previous question and so are included. Flood and earthquake damage, however, are not covered by a standard policy.

Be careful not to be lulled into a false sense of geographic security. Flood and earthquake activity is more widespread than many people realize. For example, almost 90 percent of the U.S. population lives in seismically active areas. Since 1900, earthquakes have occurred in 39 states and caused damage in all 50. And if your home is located in a flood-prone area, you are 26 times more like to suffer a flood loss than a loss from fire.

You may want to check with your agent about special catastrophic policies for normally excluded conditions like floods and earthquakes. Of course, the cost of such extra coverage may reflect the high risk involved. If you live along a shoreline, for example, expect to pay a higher premium for flood coverage than someone living on a mountain top would pay.

4. How much will I be paid for damage to my personal property?

Remember than homeowners insurance is designed to cover general personal possessions, not valuable collections like antiques, jewelry or original art. Insurance companies deliberately limit their coverage of expensive possessions so that household premiums are more affordable to everyone. After all, if they had to cover museum-level art collectors under standard homeowners policies, we would all end up paying higher premiums to cover those expensive items.

Your policy lists the specific monetary limits for personal property under what is called "Special Limits." Those limits usually are:

• $200 for money, bank notes, gold and silver (other than gold ware and silverware), platinum, coins and medals.
• $1,000 on securities, accounts, deeds, evidences of debt, letters of credit, notes (other than bank notes), manuscripts, passports, tickets and stamps.
• $1,000 on water craft, including their trailers, furnishings, equipment and outboard motors.
• $1,000 on trailers not used for water craft.
• $1,000 on loss by theft of jewelry, watches, furs, precious and semi precious stones.
• $2,000 for loss by theft of firearms.
• $2,500 for loss by theft of silverware, silver-plated ware, gold ware, gold-plated ware and pewter ware.
• $2,500 on property on the resident premises, used for business, and $250 on this property damaged or lost away from the premises.

If these limits seem low to you (maybe that engagement ring is worth much more than $2,500), you may wish to talk to your agent about additional coverage for specific items.

5. I work out of my home. Are my inventory and business property covered?

Yes, but within certain limits. Both are covered as personal property used for business purposes. However, like all personal property, there are monetary limits on reimbursement. Whether your home business is your primary occupation or a hobby that nets you a few hundred dollars a year, it is still a business and you should treat it as such. If you've invested quite a bit in equipment (woodworking tools, for example) and sell the occasional decoy, you should consider whether the personal property limits are sufficient.

Also, keep in mind that the personal liability protection in your homeowners policy does not extend to business liability. Check with your agent concerning your business insurance needs.

6. What do I do when my property is damaged or stolen?

Contact your agent as soon as possible. If there is damage to your home or possessions, make "emergency" repairs to protect yourself and your property from further damage, then call your agent. For example, if some of the windows in your home have been blown out by wind, you may board them up to prevent additional damage. In fact, your policy covers the cost of these emergency measures.

However, before setting about to make permanent repairs, call your agent. The insurance company has the right to inspect the property in its damaged condition. They may want to send a claims adjuster or instruct you to get an estimate from an independent contractor.

If you have property stolen, notify the policy immediately and call your agent.