If you own a home, you most likely have homeowner’s insurance. It is very difficult, if not impossible, to get a mortgage without it. After all, the lender has to protect his investment.

Just having a policy does not always mean you fully understand it, however. Here are four things you probably didn’t know about your financial protection.

1. Your Homeowner’s Insurance Is Based on More Than You Think

   
   While your policy rates are based in large part on the size and location of your house and the amount of coverage you choose, these are not the only factors that go into determining your rates.
   
   Your credit score is also a determining factor. Insurance companies look at information such as how much debt you owe, the length of your credit history, your payment history, and the types of credit you have as well.
   
   

2. Your Policy May Not Cover What You Think It Does

   
   Not all causes of home damages are covered by homeowner’s insurance. Causes like floods and natural disasters, for example, are frequently not covered.
   
   If you live in an area that is prone to floods, earthquakes, or other natural disasters, you should check your insurance policy to make sure that it covers what you think it does.
   
   Specifically, home flooding is almost never covered. The policy is generally a rider or sold directly by that behemoth of ineffective government agencies, FEMA. Do you need this coverage? Absolutely, especially if you reside in the flood plain. Check back often because this may is updated periodically.
   
   

3. Your Insurance May Cover More Than You Realize

   
   On the other hand, there are many accidents and problems that insurance typically does cover—including some you probably do not realize are covered.
   
   For example, your belongings and the belongings of your dependents might be protected even when you are away from home. In other words, your insurance might pay to replace your expensive watch that was stolen while you were on vacation or your son’s scooter that was stolen while he was away at college, for example.
   
   

4. Reduce Your Rates Without Risking Coverage

   
   While reducing your coverage is one effective way to lower your policy’s insurance rates, it certainly is not the only one.
   
   For example, you might be able to bundle your home, auto, and life insurance policies together to get a discount. You might also reduce your insurance risk by having a Spokane home security system installed in your home.
   
   By installing a security system, most insurance companies will give you the discount. They do this because it is constantly monitored for both emergency accidents and home invasions, reducing their risk.
   
   Another strategy for lowering your rate is to lower your deductible. This is a balancing act for most homeowners.

Homeowner’s insurance may be a necessary expense, but that does not mean you should blindly write the check without understanding your policy. Knowing these four things about your policy will not only give you a better understanding of your coverage, but it will also save you time, money and hassle down the road.

One final thing to keep in mind—the dollar amount you assign to your policy has nothing to do with you can sell your home for in this housing crisis or the abnormally high figure your tax assessor arbitrarily assigns.

No, it is the replacement cost of your home. Prices for building materials steadily climb like everything else and if you live in a union state obviously your labor cost will be higher. It is advisable to work closely with your agent, especially if you make any home improvements that raise the equity value of your home.