Homeowners and renter’s insurance policies protect the items in your home if they were to incur damage. However, what happens if you had to leave your dwelling due to it becoming inhabitable from flood, fire or other covered events? You could have to pay a sizeable sum to move your salvageable items to storage and relocation fees for someplace to stay (such as a hotel, motel or Airbnb) until your home is habitable again.
This is where the loss of coverage kicks in. This policy, also known as part D coverage, is included in homeowners and renter’s insurance policies and helps you maintain your standard of living while you wait to move back into your home. Here’s a closer look at how each works to protect you when you need it the most.
How does it work?
Say your house became flooded during a severe storm, rendering it uninhabitable for some time. Your homeowner’s policy covers the items damaged in the home under causes like flooding. However, you must also account for the added temporary living expenses, which includes paying for a place to stay, food, pet boarding and parking fees from hotel or Airbnb stays.
With the loss of use coverage, you receive protection for these expenses. After having your home damaged, you would call your insurance company to file a claim.
What does loss of use coverage cover?
As long as you have loss of use coverage, the policy provider would offset covered costs including:
- Residency expenses such as motels, hotels, rentals or an apartment
- Expenses associated with moving your items to storage
- Fuel expenses for having to have a further commute to work
- Parking fees if you move to a temporary residence that requires it
- Laundry expenses since you don’t have access to your washer or dryer
- Pet boarding fees if you have to use pet boarding while you await repairs
- Excess of normal fees for meals and grocery expenses (say you’re unable to cook and spend $200 in restaurant fees as opposed to a regular grocery bill of $100, your insurance would reimburse you the difference)
Check with your insurance provider to see which items they cover under your loss of use policy and if there are any limitations when filing a claim. Check for things like the maximum benefit amount for temporary living expenses, which would help you plan where the best place for you and your family to go to.
For homeowner’s policies, the rule of thumb is insurance companies restrict the loss of use coverage for between 10%-20% of your dwelling’s value. With this in mind, if your home is valued at $300,000, then your benefits cap would be between $30,000 and $60,000.
If you own a condo, it works similar to a homeowner’s policy in that you would receive a benefit related to the value of your residence. In addition, some insurance companies can combine your dwelling’s value with your personal property coverages.
Meanwhile, the same applies to renter’s insurance policies in that the loss of use coverage helps you maintain your standard of living while you wait to move back into your apartment. Insurance companies calculate your benefit based on a percentage of your personal property coverage.
In other instances, they may pay you a flat amount as outlined in your policy. It’s a good rule of thumb to speak with your insurance provider to learn more about how they calculate your benefit amount.
What does loss of use coverage not cover?
While your insurance company will help offset additional expenses related to your temporary living situation, check if there are any costs they won’t cover. Most insurance companies have a list of excluded expenses. Doing this prevents you from spending money on an expense only to find out later they won’t cover it.
How to get reimbursed for additional living expenses
If you have to undergo this situation, save receipts for all living expenses such as your rent or hotel bill, moving expenses, restaurant receipts and pet boarding fees. This is essential in helping your insurance company calculate reimbursement expenses. Moreover, by having these receipts available, it could expedite the claims process.
Tips on filing a claim
Many insurance companies allow you to file a claim online. It’s quick, secure and convenient. What’s more, it also allows you to supply any supporting documentation you might need such as receipts and pictures.
Ask your insurance company about its claims process. You’ll gain estimates on the time it takes to process, approve and reimburse your claim and learn about, how the company processes claims.
Pay attention to any documentation they require, and get a checklist of everything you need to do so you do everything correctly the first time. If you miss a step or don’t provide all the required information, your claim could be delayed.