The reason that banks and mortgage lenders will require all homeowners to purchase homeowners insurance before they disburse the funds for the home loan is that the bank wants to make sure that their loan collateral (your house) is protected.

Home insurance protects against things like fire, explosions, when your neighbor drives through the side of your house, and many of the other things that can cause damage to your house.

Before you purchase home insurance then be sure to shop around and compare homeowners insurance quotes from many different insurance companies to find the best deal.

Not all homeowners insurance policies are created equal so be sure to do your research before you commit to choosing a policy.

There are also many different discounts that can be taken advantage of when moving into a new home. Some of the most popular discounts include discounts for having a functioning security/alarm system installed, having your auto insurance and your home insurance on the same policy, and many more.

The main damage from hurricanes is caused by high winds which can pry roofs off and create structural damage to homes. In the past, homeowner’s insurance usually covered wind damage. However, with the high cost of recent hurricanes in Louisiana and Florida, many insurers have started to drop this coverage.

As hurricanes occur more frequently than floods or earthquakes, it is usually easier to determine how susceptible your house is to hurricane damage. If you talk to neighbors who have lived in the area for awhile you can often get a sense of how badly hurricanes hit your locale. In general, houses near coastlines or in low lying areas face a greater risk of damage from hurricanes.

Check with your insurance company to see if wind damage is covered by your policy. If not, and you know you are at risk for hurricanes, you should consider purchasing coverage for both wind and flood damage.

Renters generally have it easier when it comes to wind damage coverage. There is a lower risk of damage to personal property in the event of high winds, so wind damage is usually covered by renters policies. However, if there is any doubt it’s best to review your policy or call your carrier to make sure.

Like earthquakes, your typical homeowner’s and renter’s insurance does not cover damage from flooding. If you live in an area that is prone to flooding, chances are your mortgage lender already requires you to maintain flood insurance. However, where your house is located has a huge impact on how much flood damage you are likely to sustain.

The federal government maintains a helpful website called FloodSmart.gov that can be useful for determining your home’s flood risk. If you live on a hill you are likely to sustain much less damage than if you live near a river. If you find that your home is particularly susceptible to flooding you should consider increasing your flood insurance coverage above the minimum that your lender has set.

Once you have determined your flood risk, you can contact the National Flood Insurance Program run by FEMA or private insurance companies to see how much additional flood insurance will cost. As with the cost of earthquake insurance, the decision about whether to obtain flood insurance is a balancing act between the ongoing cost of he policy and how much it would cost to repair your home in the event of a flood.

We next cover hurricane insurance, which is particularly timely since we are just entering hurricane season.

Today we will cover earthquake insurance and in future posts we will talk about insurance to protect you against hurricanes and flooding.

Earthquake coverage is probably of most concern to California residents. The California Earthquake Authority works with companies to provide insurance against quakes but the policies are expensive and often have deductibles as high as 10 to 15 percent. You first need to determine what type of damage your house is likely to sustain in an earthquake and how much the repairs might cost.

A website called ShakeOut.org is a useful resource for figuring how how susceptible your home will be in a large earthquake. Factors that can determine how much damage your structure is likely to sustain include what kind of foundation you have, how close to a fault line you live, and whether your house rests on bedrock or fill. You can also talk to local contractors to get a general sense of how much structural repairs to a house like yours are likely to cost.

The next step is to get some quotes on earthquake insurance from the California Earthquake Authority and compare the cost of a policy against how much repairing your house will be. Many California consumers have determined that getting earthquake insurance is not financially smart.

If getting earthquake insurance doesn’t make financial sense, consider applying what you would have paid in premiums to reinforcing your home. In some cases, retrofitting your house for an earthquake can pay off more than buying insurance.

However, this rule does not necessarily apply if you already have insurance with a carrier. You will often save money by bundling your policies together and keeping them with the same company. If you already have homeowner’s – or renter’s – insurance with a specific company, talk to them about adding your car insurance. In most cases an insurer will provide a significant discount if you keep your additional policy with them. It’s the same concept as buying in bulk: the more you buy, the more you should save.

Once you have gotten the quote from your current insurer, it would pay to continue shopping around. Now that you have one quote to work with, you can compare that to other insurers. If the first few quotes you get are higher than your existing one, then it means you should stay put. But remember, even if you have a policy, shopping around is the best way to get very cheap car insurance quotes. It’s time to go out there and start saving!

The short answer is: not as much as you might think. According to Fortune magazine’s ranking of the 50 most profitable industries in the United States, health insurers’ after-tax profits were only 2.2 percent of revenues in 2008. Of course, even though we’re talking about a fairly small profit margin, there’s still a huge amount of revenue involved, so the profits are high in absolute terms.

For example, Wellpoint, Inc., a large insurer selling mainly group-insurance policies to relatively large employers, had revenues last year of $61.572 billion. That, by any measure, is a lot of money and we’re talking about just one insurance company here. 93% of Wellpoint’s revenue came in the form of premium payments.

WellPoint’s after-tax profits in 2008 were 4.07 percent of total revenue. The year before the profit margin was 5.47 percent. So yes, insurance companies do make a lot of profit, but as a percentage of total revenues it’s not huge.

Here are some tips on how to save on homeowner’s insurance:

Shop around. Comparison shopping for policies could take some time, but it could also save you serious money. There are dozens of homeowner’s insurance comparison websites around to make this task easier.

Increase your deductible. If you are comfortable with a bit more money coming out of your pocket in the event of a natural disaster or other damage to your building, increasing your deductible to over $1,000 can save you as much as 25% on your policy.

Get your rebuilding costs right. You should not be insuring your home for its full value, which includes both the home’s structure and the land it sits on. When calculating rebuilding costs, only include the value of the structure itself, not the land.

Improve your house’s security. Intstalling burglar alarms, smoke detectors, and dead-bolt locks can cut your homeowner’s insurance premium by over 15%.

Ask for discounts. Most insurers have a variety of discounts available, such as if you are over 55 or have an auto insurance policy with the same company. be sure to ask what’s available when shopping for a policy.

With a bit of planning you can get a great homeowner’s insurance policy without paying an arm and a leg for it.

For valuables such as these, most homeowner policies place a limit of $1,000 to $2,500 for each category of item. That means, for example, that all of your jewelry combined – not each item – would only be covered up to the $1,000 to $2,500 total limit. If you have antiques or heirlooms you can quickly see how such coverage would be woefully inadequate.

To properly cover valuables you will first have to decide which items you want covered. Then take those items to a professional appraiser who will put a price tag on each item. You will then need to contact your insurance company to get a rider placed to include each item on your policy. This usually costs around $1 per month for every $100 in coverage, although it varies by insurer.

While it won’t necessarily be cheap to insure all your valuables, you will sleep better at night knowing you will be properly compensated if anything ever happens to them.

Here’s how it works: when you sell your policy to a stranger, that person pays you a cash sum and continues to pay the premiums on the policy to keep it current. Here’s where it gets weird: the stranger to whom you sold your policy only profits when you die.

These transactions are called life settlements and they are becoming more common. Huge banks like JPMorgan Chase and Goldman Sachs invest in packages of life settlements because the return is not correlated with the stock market. So as an investor, life settlements can be a great way to diversity and hedge your stock market exposure.

Investors in life settlement policies prefer people over 65 who are insured for at least $500,000 or more. So would you sell your life insurance policy to a stranger?