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Many people purchase homeowners insurance or renters insurance to financially protect themselves against disasters. The policy comes with a variety of coverage options. One valuable coverage your home policy may include is additional living expense coverage, or loss of use. This coverage helps cover costs when your home has been deemed uninhabitable while repairs are made after a covered loss.
Additional living expenses coverage is automatically included in many homeowners, condo owners and renters insurance policies, but not all. Whether it’s included in your policy or not, Bankrate’s insurance editorial team conducted research to help you navigate additional living expenses coverage.
What are additional living expenses?
Additional living expenses coverage covers costs that arise from being displaced from your home after a covered loss. If a natural disaster, such as a tornado, or other claimable event occurs requiring you to seek other accommodations, additional living expense coverage may cover the cost of:
- Food costs above what you routinely pay
- Laundry expenses
- Pet boarding
- Temporary rental accommodations
- Hotel stays
- Additional fuel costs
- Rental car and other transportation costs
- Storage fees
- Moving costs
Coverage limits and details under additional living expenses can vary by carrier. You can check with your insurance agent or read your homeowners policy to determine what coverage you have under loss of use.
What is covered by additional living expenses?
Although coverage details for additional living expenses can vary by carrier, generally speaking, additional food, transportation, housing, and utility costs are typically always covered.
Current costs you are already responsible for paying, such as childcare, insurance, mortgage, food and utilities are usually not covered. The key to what is covered is the overage, or excess, fees. For instance, if you are temporarily staying in a hotel, you may incur additional laundry or food costs, since you don’t have access to a washer, dryer and kitchen. If you normally spend $100 on gas, but your temporary accommodations are further from your job so you are now paying $200, you may be eligible for reimbursement for the additional $100 in transportation costs.
Claimants should keep detailed records, including mileage and receipts for transactions, to submit under the claim for reimbursement. Continue to make your usual payments for current expenses, like your mortgage or rent and utilities. These expenses are not covered. Additional living expense coverage will only apply if the reason your residence is uninhabitable is because of a covered peril.
How much additional living expenses coverage should you have?
Typically, additional living expenses coverage defaults to a percentage, generally 20 to 30 percent, of your dwelling coverage, meaning that you do not need to choose your coverage amount. However, if you need to, you may be able to increase the amount of coverage or opt for a level called “actual loss sustained.” This means that there is no set dollar amount on the coverage and that the insurance company agrees to pay all reasonable expenses.
Some financial experts recommend purchasing as much additional living expenses coverage as you can afford, since you can never predict what kind of disaster will befall you and for how long you may be displaced. Other insurance professionals recommend that you keep track of the costs for hotels, rentals, restaurant meals and other likely expenses and calculate how much you might need for 30 to 60 days of displacement.
Learn more: Affordable home insurance companies