If you get a mortgage to purchase a home, your lender will require you to obtain homeowners insurance. But even if you buy a home with cash, having homeowners insurance is a good idea to protect your investment.

How does it work?

Homeowners insurance protects your home and its contents from damage from disasters, theft and other named perils. For example, if a fire destroyed your home, your insurance would pay to repair or rebuild your home and replace your possessions up to the limit named in your policy.

Homeowners insurance also provides you with liability protection. If someone slips and injures himself on your icy walkway, your homeowners insurance would cover it. Likewise, if your dog bites someone and causes injury, your homeowners insurance would pay for medical bills and damages from lawsuits.

What doesn’t it cover?

Homeowners insurance covers what are called “named perils,” meaning specific incidents named in the policy. Such policies commonly exclude damage from floods and rare events such as war, airplane crashes and meteor strikes. Homeowners insurance also won’t cover the possessions of people you rent the house to; they need to get their own renters insurance.

How to get it

Most major insurers offer homeowners insurance, and all you have to do to get a quote is go online or make a phone call. You may be able to get a discount if you get a policy with the company that insures your car or with which you have life insurance. Also check with your lender or Realtor to see if they have deals with certain insurers.

Once you find a policy, a lender that requires you to have insurance will set up an escrow account for you so that you pay the policy premium monthly along with your mortgage payment.