A homeowners policy insures the value of your house and its contents against theft and against damage from vandalism and natural disasters. It also provides liability coverage, which typically pays $100,000 to $300,000 if someone is injured in your home and sues you. Choose a replacement-cost policy that covers rebuilding your house and replacing your belongings at today's prices. (Renters need insurance too. A renters policy protects belongings and provides liability coverage. You'll pay $100 to $400 a year for $25,000 to $35,000 of personal-property protection and for $100,000 to $300,000 of liability coverage.)

The standard homeowners policy doesn't offer protection against earthquakes or floods, however. If you live in an area prone to such conditions, get a rider or buy a separate policy. If your insurer doesn't offer coverage, ask your agent about buying flood insurance from your state. The cost ranges from $500 to $2,000 a year depending on where you live and the type of home you own.

Finally, homeowners policies carry low limits on the amount they'll pay to replace home-office equipment and luxury items, like fine art, jewelry, or collectibles. (Most won't pay more than $1,000 for stolen jewelry, for example.) Buy additional insurance — known as a floater or endorsement — on valuables worth more than the limit.