Final answer:
A homeowner's insurance policy typically consists of property coverage and liability protection, helping to manage risks associated with property damage and personal injury respectively.
Step-by-step explanation:
The two main components of a homeowner's insurance policy are property coverage and liability protection. Property coverage helps pay to repair or rebuild your home and replace personal property due to a covered loss.
On the other hand, liability protection covers legal or medical expenses if someone gets hurt on your property and decides to sue. Insurance also plays a crucial role in financial planning, allowing households and firms to manage risk through regular premium payments. As people buy into insurance pools, they are safeguarding against significant financial effects stemming from unexpected events.