Homeowners' insurance is a necessity, something every property should have. If you have a mortgage, your lender will require coverage -- and if your home is mortgage-free than you should have coverage anyway.

Policies and protections differ; so do costs. You want maximum protection for least cost. Homeowners' insurance generally comes in standardized packages.

• HO-1 offers protections against such perils as fire, theft, and certain types of liability.

• HO-2 is more comprehensive. It includes protection against damage from broken pipes, the weight of ice and snow, and broken hot water heaters.

• HO-3 gives the most protection. It includes everything in 1 and 2 and excludes only events such as earthquakes, floods, nuclear accidents, and wars.

Which policy is best for you? Make a list of valued possessions and types of coverage you think you need. Sit down with an insurance broker to review what's included (and excluded) from each policy form and the other forms of coverage which may be available.

Real estate brokers, attorneys, fee-only financial planners, and CPAs can recommend local insurance brokers. Once you have some names, here are some questions should you ask:

• What form works best in your situation?

• What is included/excluded under the form you select?

• Do you have a personal office at home? If yes, what is covered?

• Do you have a home-based business? If yes, you may require additional coverage specific to the type of business you operate. In this case, think in terms of clients dropping by, business equipment, inventory, etc.

• Do you have antiques and jewelry? What coverage do you need?

• How much personal liability protection will the policy provide? What is the cost of additional coverage? What about an "umbrella" policy?

• If you have a loss, will coverage be for actual cash value or replacement cost?

• What is the policy deductible? (Generally lower deductibles mean higher premiums; higher deductibles result in lower premiums.)

•  How will the policy be paid? If your lender maintains an escrow account, the insurance policy will be paid by the lender -- remember, the house is security for the lender's mortgage. If you pay for property taxes and insurance directly, you will pay the bill. For details regarding escrow accounts and insurance requirements, speak with your lender.

• Is your home an historic property? If yes, what special coverage is required?

• When a policy says it covers "personal property" what does that term mean? What does it include and exclude?

• How can you reduce policy costs? Ex: if you buy auto and home insurance from the same source will your combined expenses decline?

• What home improvements can you make to get lower premiums?

• How are claims handled if you have a loss? For your protection, photograph or video your home and special possessions; keep the photography in a safe deposit box.