I view my home as a conduit for creating lasting childhood memories for my children. Leaving cookies and milk by the fireplace for Santa, running through the sprinklers in the backyard, carving Jack-O-Lanterns on the kitchen table… but my home not only allows my family to have these experience, but it is also my most valuable monetary asset. And for most other people, the same holds true… their home is their most valuable asset.

One thing that we homeowners have in common is homeowners insurance. It is just one of those residual responsibilities that come along with home ownership. Yes, shelling out an extra thousand dollars or more for insurance can be a pain, but it is necessary. Homeowners insurance protects your most valuable asset in the event of tragedy, natural disaster and more.

Most policies are structured in a similar way. The main dwelling, or your home, is covered based on either the actual cash value or replacement cost. Generally, the actual cash value is the market value or the predicted selling price if the house were for sale. The replacement value is how much it would cost to replace the house, brick by brick, beam by beam, in the event of a total loss. Normally replacement cost is more than actual cash value.

Then, other structures, such as fences or outside storage sheds, are covered. More often than not this coverage is 10% of the dwelling coverage. Personal property is also covered as either replacement cost or actual value. This means that the contents of your home, such as electronics, appliances, furniture, jewelry and even flooring, is insured from loss as a result of theft or other destruction.

The typical policy also comes with actual loss sustained or loss of use coverage. This reimburses you for expenses incurred while your home is inhabitable and being repaired. This may include costs such as rental expenses or storage.

Standard policies also include personal liability and medical payments coverage. Personal liability kicks in in the event that you are sued by someone who is injured on your property. This can assist with legal expenses or for the payment of a claim. Medical payments will, up to a specified limit, pay the medical bills for a person injured on your property.

Homeowners insurance may also include a series of endorsements for things such as an inflation guard and lock replacement.

Homeowners insurance can be expensive, but there are things that you can do to reduce the cost:

1 – buy a home in a low risk area

2 – increase the policy deductible

3 – reduce personal property and/or liability coverage limits

4 – combine all of your insurances with a single company

5 – remain loyal to one company – insurance companies often give discounts to loyal customers

6 – install a monitored alarm system, smoke detectors and/or sprinklers

7 – trade your pit bull or Chihuahua in for a less aggressive breed

8 – get rid of the trampoline and put a safety fence around the pool

9 - shop around, rates can vary differently from company to company

While it is good to look for ways to save money on your homeowners insurance policy premium, it is also important that you not be sparing with your coverage. You do not want to end up in a situation where you reduced your coverage to save $100 upfront… but wind up having to pay $20,000 on the backend.

Review your policy annually to make sure that you understand it and to make sure that you have adequate coverage. If you think that you can safely reduce some limits… do so. But if your current limits are insufficient to meet your needs… don’t skimp… increase the limit.