(MONEY Magazine) – Before you can move into a house, your lender will require you to buy homeowners insurance. Don't shrug off this expense -- typically $300 to $600 a year on a $100,000 house -- as another forgettable closing cost. As the victims of Hurricane Hugo and the Bay Area earthquake learned, adequate coverage can mean the difference between ruin and recovery after a disaster. This guide will help you buy wisely: What's covered. The best policies adequately protect your house, its contents and you -- the latter against lawsuits if someone is injured on your property or, say, sues you when your lovable pooch wanders down the street and takes a chunk out of her calf. Buy the broadest coverage you can afford. Be aware, though, that policies usually cover a home for only 80% of its replacement value -- what it would cost you to rebuild. Insurance against flood and earthquake damage is never part of the standard package. Home buyers in flood-prone areas should ask their agents for coverage from the National Flood Insurance Program, a federal plan that costs about $200 to $300 a year for a $150,000 house. To get quake coverage, you typically must buy what's known as an endorsement; some companies sell the insurance as a separate policy. The price depends on where you live; in California, you might pay $300 to $600 a year for a $200,000 house. Most policies automatically insure your belongings like furniture and clothing for half the coverage you carry on your house. If 50% seems low -- for example, if you are a home electronics fiend -- pay for more protection. Contents coverage of 70% might raise your annual premiums by 10% to 15%. Certain valuables have their own coverage limits. For instance, theft losses on jewelry and furs are generally insured only up to $1,000; silverware, $2,500. For extra protection, you'll pay from 40 cents per $100 of additional silverware insurance to $4 per $100 for jewelry. Almost all policies automatically provide $100,000 of personal-liability insurance for you and your household. It's cheap to raise that protection, and in today's litigious society it's probably wise. For another $5 to $15 a year, you can get $300,000 of coverage. You might need even more, though, if you are a tempting target such as a highly paid executive. If so, ask your agent about an umbrella policy -- excess liability insurance that comes in $1 million increments above your homeowners and auto insurance protection. Cost: about $150 a year for $1 million in coverage. Homeowners policies also generally pay additional living expenses -- up to 10% of your home's coverage -- if you must evacuate during rebuilding. Crucial clauses. Tell your agent you want a guaranteed-replacement-value clause that requires the insurer to pay the full cost to repair or rebuild your home. Otherwise, you'll get reimbursed only up to the policy's limit. Also, get replacement-cost coverage for your belongings so you won't be docked for their depreciation. Expect to pay 10% to 15% extra for each clause. Discounts to demand. Most policies come with a $250 deductible -- the amount you must pay per loss before the insurer provides benefits. By raising the deductible to $500, you can shave 5% to 10% off your premiums. Many insurers also offer discounts of 10% if your home has a fire or security alarm that rings at a nearby fire or police station.