1. Do I really need insurance for my home?

Yes. Insurance is your protection against the many property and liability risks you face as an owner or renter.

For example, if somebody sued you for an injury or damage caused by you or your property, the cost of defending that suit could run into thousands of dollars just for legal fees-regardless of the outcome of the suit. And if you were to lose your home due to a fire or to have the contents damaged or stolen, you probably could not afford to replace everything all at once. That's why mortgage lenders, as a rule, require homeowners insurance.

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2. 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, some mortgage companies collect 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 should select the insurance you feel offers the best coverage at the best rates.

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3.What does a homeowners policy cover?

With about 900 insurance companies writing property/casualty policies in the United States, individual homeowners policies vary. However, 80 percent of homeowners policies are based on a standard form, and all homeowners policies cover two important areas: property and liability. Moreover, your policy may cover you for additional living expenses should your home not be habitable for a period of time due to a covered peril.

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4. What about floods, earthquakes and other catastrophes?

Most catastrophes are covered. For example, wind damage from hurricanes or tornadoes is covered as a windstorm peril. But, flood damage and earthquake damage are not covered by a standard homeowners policy. A separate policy is required.

Flood and earthquake activity is more wide- spread than many people realize. Nine out of ten Americans live 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 likely to suffer flood damage than fire damage.

You may want to check with your agent about special catastrophic policies for normally excluded conditions like floods and earthquakes.

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5. I am a renter, not a homeowner. Do I need insurance?

Yes. The same rule of thumb that applies to home, owners applies to renters. If catastrophe struck tomorrow, could you afford to replace everything you own? Or if you were sued, would you have enough money to pay legal fees and possibly settle the suit? If not, chances are you would benefit from the protection that renters insurance brings.

Renters insurance offers the same general personal property coverage and liability protection as a homeowners policy. Thus, your camera would be insured while you are on vacation, and you would be covered if your sofa were to crash through the wall of your apartment lobby leaving a gaping hole. In fact, most policies are surprisingly extensive and may include additional living expenses (also called loss- of-use coverage), if you are forced by fire or other damage to live elsewhere.