Don't wince.

No one likes to buy insurance, but, compared to what you'd have to pay if you don't have the coverage when you need it, the cost of protection is a steal.

And it's for a worthy cause. Your home is likely your most valuable asset.

Take a cue from your lender.

Lenders demand coverage to protect them, say if after a disaster, you decide to walk away from your investment. Even if you can afford to pay cash for your home, you should still insure it unless you are also rich enough to buy another should the need arise.

Home insurance

Home insurance covers your home and your personal property it stores against losses from fire or lightning, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism or malicious mischief, theft, glass damage and, yes, volcanic eruption.

That almost covers all the bases.

You should insure your home and your belongings for their replacement value, not the market value (which includes the land) and not your belonging's depreciated cash value. That will give you enough coverage to rebuild your home and replace your stuff at the time your loss occurs. Automatic inflation adjustment riders are also wise to make sure replacement cost coverage keeps pace with the growing economy.

It's important to read the small print to determine what's covered and to assess your needs. You could need additional special coverage for jewelry, furs, computers, landscaping and other items whose replacement might exceed your coverage limits or isn't covered by the primary policy.

Basic home insurance policies also protect you from liability, say if someone is injured in your home or on the property.

To keep your costs affordable (and they vary widely depending upon the age, size, condition and location of your home), without skimping, shop around for the best company, raise your deductible, buy a newer home with the latest code-complying construction, improve your security and safety systems, consider discounts for seniors and group coverage and consider buying all your insurance -- home, auto, life, etc. -- from one insurer for the multiple policy discount.

Editor's Note: This is part one of a two-part series. To go to the second half of this special installment, click here