insurance

Disaster strikes: loss of use insurance

Loss of use insurance covers your bills

What adds insult to injury after watching your cherished home become decimated by fire or some other disaster? Being homeless while waiting for your insurance payment, then waiting while your house is being repaired or rebuilt.

If your home insurance coverage does not include "loss of use" (also called "coverage D" or "additional living expenses coverage") you may be not only be out of a home temporarily if disaster strikes; you may also be out of a lot of money. Not only will you still be paying your mortgage, but there are the added rent or hotel bills, boarding for your pets, and restaurant meals that come with being displaced.

Make sure you're covered

A typical home insurance policy includes basic types of coverage including: the dwelling itself, other buildings on the property, personal property and other contents in the house, personal liability, and medical payments.

That might not be enough, especially if you carry personal debts. You also want to make sure that your policy includes ALE (additional living expense) or LOU (loss of use) coverage so that if you are displaced you'll have insurance to pay rent, meals, and other expenses. This type of insurance aims to help you maintain your standard of living while your home is being repaired or rebuilt.

Know exactly what is covered

Some ALE or LOU insurance policies will only pay expenses above your "normal" obligations (that is, they will not help with your mortgage or food bills), while others will pay your mortgage, transportation, and other expenses. Often the coverage will be limited to 20 percent of the amount of the home. For a $100,000 home, you would get $20,000 to pay rent, hotel, and eating out until the house is repaired or rebuilt.

Homeowner "loss of use" or "additional living expenses" coverage will vary widely by insurance provider; it is not always included in basic homeowners' policies. Make sure you understand your home insurance policy should your house be destroyed by a fire or other disaster.

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