Homeowners need to have a home insurance policy in order to protect their homes as well as personal property. Those who rent require insurance to protect their furniture and personal belongings. Understanding the coverage can help you get the most out of your home insurance if you ever make a claim. Most home insurance policies are mainly based on the total coverage amount provided by insurance firms.

Home insurance policies mainly fit into three categories: HO-1, HO-2 and HO-3

HO-1 and HO-2 policies only provide coverage for the property, not for the individual's belongings. HO-3 policies cover both the home and the personal belongings.

While looking for home insurance you need to compare the types of coverage provided by various insurance companies. It is very important that you know and learn everything about home insurance before you opt for it.

Here is list of five things you need to know before opting for a home insurance policy

1. The type of house or home you have determines the home insurance policy you need to purchase. If you own a single-family house, you need to have an HO-3 or special home insurance policy to protect your home and personal things. If you are the owner of a condo or townhouse, you need to have a policy which will cover your personal belongings as well as fixed structures in the home. If you own any rental property, you require a dwelling fire insurance policy. A dwelling fire policy does not cover stuffs within the home; it only covers for damage to the property.

2. You need to figure out the amount of coverage you need. The better the coverage, the less you have to pay out of your pocket if any disaster strikes. In many cases, your lender determines the amount of coverage you require to purchase a policy, which will at least cover the mortgage amount. The amount of home insurance coverage you get for your home and other personal contents will affect the premium you pay.

3. Whether you are a home owner or rent a property, there are various levels of coverage available for protecting your home and personal belongings. All home insurance coverage protects against a specific number of incidents. Some examples are storm, fire, theft or vandalism. Moreover, each insurance policy usually offers extra coverage such as personal liability, damage to the property, additional living expenses and medical expenses.

4. Most home insurance policies have a maximum limit; they usually cover certain things, including jewelry, gadgets, furniture and other belongings. These limits offered by insurance companies differ from one to another. If you have any expensive items you want to protect, be sure the policy has enough coverage for your personal needs.

5. Most home insurance policies have restrictions. No insurance policy covers all kinds of loss. Many homes are located in areas that are prone to natural calamities like storm, earthquakes and floods. Home insurance policies do not provide any coverage for flood and earthquake damage. If your home is located in such areas, special flood and earthquake policies are there to protect your property against these loses.

In addition to these tips, check with your insurance agent every year to ensure that your policy provides sufficient coverage.