There are a lot of expenses that come with homeownership. Some of these expenses may appear to be useless but are actually very important, such as homeowners insurance. What the heck is it anyway and what is used for? This is your first lesson in Homeowners Insurance 101.

Homeowners insurance is essential. This insurance covers issues that happens to your home or belongings such as in the case of a natural disaster. This insurance is not required by law but in most cases mortgage lenders to require a policy in order to loan money to you for a home purchase.  Even the purchase of a condo may also require some sort of homeowners coverage. Homeowners can cover things such as an injury of a house guest at a dinner party or tornado damage.  There could be a lot of reasons that you would need it. 

There are different policies depending on what kind of home, including renters, mobile homes, and even older homes. It's important to point out that homeowners policies don't cover issues that come from maintenance issues or wear and tear on a home. A basic policy should cover general structures on your property and should provide for living expenses in case you are not able to live at home after a fire or other insured disaster. The amount of coverage provided for each of these items varies depending on the insurer and the type of policy.

Liability limits are associated with homeowner policies which determine the amount of coverage you have if something would happen to your home. Limits typically start at $100,000 but additional coverage can be purchased. The liability limit is a reflection of the amount of coverage for your actual home, other structures on your property, such as a garage, are usually covered for 10 percent of that amount. Coverage for personal belongings usually falls somewhere between 50 percent and 70 percent of the amount of coverage on the structure of the home. In the event you would have to live somewhere else because of damage to your home, most plans cover costs of living away from home -- hotel, restaurants/food, etc. -- up to 20 percent of your home's liability limit. Other policies may provide unlimited coverage for living expenses but only for a limited period of time.