It is important to understand your home insurance policy — what it covers and doesn't cover, what affects the rate, and how and under what circumstance it can be cancelled or non-renewed. A home is often a person’s most valuable possession, yet many homeowners have only a vague idea of what their home insurance policy covers. And too often, it is not until disaster strikes that they find their insurance coverage is not good enough. Therefore it's important to understand your home insurance policy — what it covers and doesn't cover, what affects the rate, and how and under what circumstance it can be cancelled or non-renewed. There are five types of homeowners policies offered by most companies. They are generally referred to as Forms 2, 3 and 8 for homeowners; Form 4 for tenants orrenters; and Form 6 for condominium owners. It is important to insure your home to replacement cost value because under certain circumstances you may be subject to a recovery amount less than what it would cost you to restore your home to its pre-loss condition. The amount of coverage you carry is important in the event of a partial loss (a loss less than the total destruction of your home). Most people suffer a partial loss. Many companies give a premium reduction if you install a smokedetector, burglar alarm, dead bolt locks and fire extinguishers. Discounts may be obtained if you purchase other policies through the same company. An informed consumer can obtain more value for his or her insurance dollar. Prices for nearly identical home insurance coverage can vary greatly among companies so shop and compare.