Some perils are mandatory. Others are options. A few are special. For example, on your homeowners insurance you can choose to exclude liability. That is, damage to other people and/or their belongings while they are on your property. Auto policies, however, require it.

You can purchase special coverage, such as a rental car in case an accident renders your car unsafe to drive or, for your home, a high-risk peril such as earthquake coverage.

Some perils are limited or excluded. For example, flood insurance for your home can be provided separately by a special carrier. Also, carriers typically exclude damage that occurs as the result of criminal acts which you commit or have prior knowledge about. (Such as stealing your own car or letting Cousin Rastas run a meth lab in your basement.) Typically, damage caused by acts of war and riot are not covered. Having lived through Mt. St. Helen's, I can tell you that volcanoes are really unpopular.

Generally, your policy will exclude damage from mechanical failure and/or negligence. For example, your car's fuel pump gives out, rendering your car useless. Your insurance covers your car in case of an accident. Fuel-pump failure doesn't qualify as an accident. Therefore, it will not be covered.

For another example, you should have fixed the leaking toilet in your bathroom, but you neglected to do so. Seeping water ruined your bathroom floor. Yes, you can always file a claim with your carrier. But if the damage can be traced to poor maintenance or carelessness, you can face the dismal prospect of a denial. With your home or your car, it pays, literally, to be cautious and prudent.

Typically for the coverage you purchase, you will pay a deductible. (NOTE: There is no deductible for liability.) Simply stated, a deductible is your share of the bill. Most carriers will decrease your premium if you pay a higher deductible. This is your choice, but it can also be a trap.