Unless you pay cash for your home, your lender will require proof of a homeowner's insurance policy before closing. This policy protects your investment in the home, as well as the lender's. Homeowners often assume that the coverage required by their lenders is enough. However, you should determine what your personal insurance needs are and make sure they are reflected in your coverage. Once you have established what you need, you can shop for a competitively priced insurance quote that provides replacement cost coverage for your house and personal property.

What's protected?

Here's a general overview of what homeowner's policies protect against:

Casualty or hazard: This type of insurance pays for rebuilding or repairing your home should it be destroyed or damaged by specific hazards. The most common hazard covered is fire damage. However, your policy may cover losses due to:

• lightning
• windstorms, hail and explosions
• riot or civil commotion
• damage from vehicles
• sudden and accidental damage from smoke
• vandalism or malicious mischief
• breakage of windows due to theft or accident

Be sure to determine precisely what is and isn't covered, and how it relates to your needs. For example, if your home is in a flood-prone area, you will want to look closely at your policy's coverage for flood damage. If flooding is not covered, you will need to purchase a separate flood policy.

Liability: This protects you against lawsuits resulting from injuries to any visitors on your property. The cost for this coverage is largely based on the dollar limit of the coverage.

Personal property: Personal property coverage protects what's inside your home. Some items you may want to include in your coverage are: jewelry, computer equipment and other valuable possessions. Coverage of personal property varies widely, so be clear on exactly what your policy includes.

Ten ways to save money on homeowner's insurance

Homeowner's insurance prices can vary significantly. Companies offer several types of discounts, but they may not offer the same discount or the same amount of discount in all states. Ask your insurance agent or company representative about any discounts available to you.

1. Shop around.

Friends, family and the Internet are good sources to find homeowner's insurers. Don't focus on price alone. Look for a fair price and excellent service. High-quality service may cost a bit more, but if you need to make a claim, the extra service you get may be worth it. Ask what they would do to lower your costs. You may also want to check the financial ratings of the companies with AM Best or Standard and Poor.

2. Compare deductibles.

Deductibles are the amount of money you have to pay toward a loss before your insurance company starts to pay.

3. Consider purchasing your home and auto policies from the same company.

Some companies that sell homeowner's, auto and liability coverage will take a percentage off your premium if you buy two or more policies from them.

4. See if you can get a new-house discount.

A new home's electrical, heating and plumbing systems and overall structure are likely to be in better shape than those of an older house.

5. Improve your home security and safety.

You can usually get discounts for a smoke detector, burglar alarm or dead-bolt locks. Insurance savings go up if there's a sophisticated fire and burglar alarm that rings at a monitoring facility. Before you buy such a system, find out what your insurer recommends and compare the cost of the system to savings on premiums.

6. Be a non-smoker.

Smoking accounts for more than 23,000 residential fires a year. Some insurers will reduce premiums if all the residents in a house don't smoke.

7. Try to get group coverage.

Alumni and business associations often offer a discount for association members. Ask your association's director if an insurer is offering a discount on homeowner's insurance to members.

8. Stay with an insurer.

If you stick with your insurer for three to five years, you may qualify for a premium reduction.

9. Compare your policy limits to the value of your possessions annually.

You want your policy to cover any major purchases or additions to your home, but you don't want to spend money for coverage you don't need.

10. Compare public vs. private insurance programs.

If you live in an area especially vulnerable to coastal storms, fires or crime and are planning to buy homeowner's insurance through a government plan, check to see if you can buy insurance at a lower price in the private market.