When disaster strikes, the last thing you want to worry about is paying for emergency shelter. If your home becomes unlivable, your home insurance policy may pay for lodging and daily expenses through your loss of use coverage.
In addition to covering your home and personal property, a homeowners insurance policy also has loss of use coverage. This coverage can come in handy if your home is severely damaged and you have to move out temporarily during the repairs. It is important to know what loss of use coverage is, how it applies and how it can vary by policy type and insurance company. This way, you can help your family be protected should disaster ever strike.
What is loss of use coverage?
Also known as additional living expenses, loss of use coverage is part of the standard homeowners insurance policy. Your policy also lists this protection as Coverage D.
Loss of use coverage pays for essential costs while you aren’t able to live in your home due to a covered claim. Instead of paying out of pocket for things like an extended hotel stay and daily restaurant visits, loss of use coverage reimburses you for those expenses.
Loss of use coverage only applies when your home is damaged in a covered peril. For example, if your home was severely damaged in a flood, loss of use coverage wouldn’t apply because home insurance doesn’t cover flood damage and flood policies exclude loss of use coverage.
There are also specific limits for this coverage. For example, your policy may only carry up to 30% of your policy’s dwelling coverage, which could be up to $60,000 on a $200,000 policy. Be sure to talk to your insurance provider about your policy and what kind of coverage is adequate for your needs.
How does it work?
Say a major portion of your house gets burned down in a wildfire, rendering it uninhabitable for some time. Your homeowner’s policy would cover the cost of the rebuild, as well as any personal belongings that perished in the fire. In addition, your loss of use coverage would help pay for your temporary living expenses, like hotel or Airbnb stays, food, pet boarding, parking fees and more.
Your insurance company may handle your loss of use payment in a few ways. Some insurance companies like Safeco may be able to offer immediate assistance through an advance against your claim’s settlement, while others may help you find and pay for a rental property or other temporary lodging.
In the meantime, you should keep track of all receipts for your normal living expenses so you can be reimbursed by your insurance company later through your claim’s final settlement.
What does loss of use coverage cover?
Loss of use coverage reimburses you for most living expenses to maintain your normal living standard while you’re unable to live in your home. The basic coverages include:
- Residency expenses such as motels, hotels, rentals or an apartment
- Expenses associated with moving your items to storage
- Fuel expenses if extending your work commute
- Parking fees if you move to a temporary residence that requires it
- Laundry expenses if you don’t have access to a washer or dryer.
- Pet boarding fees if you have to use pet boarding while you await repairs.
- Excess of normal fees for meals (say you normally cook at home but are unable to at your temporary place and have to eat at restaurants instead)
Every insurer offers slightly different coverages, so check with your insurance provider to see which items they cover under your loss of use policy. You should also find out if there are any limitations, like a maximum benefit amount for temporary living expenses.
Most insurance companies provide loss of use coverage at 10%-30% of your dwelling’s insured value. So, if your dwelling coverage (or coverage A) is at $300,000, then your loss of use benefits cap between $30,000 and $90,000. However, a few insurers may have unlimited loss of use coverage limits, so check your policy declarations page to see how your insurance applies.
Loss of use coverage works similarly for condo insurance. If your condo unit is damaged and you have to relocate, you would receive additional living expenses coverage through your HO-6, condo policy. To calculate your loss of use coverage limit, some insurance companies may combine your dwelling’s value with your personal property coverages.
The same coverage 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 rental. Insurance companies calculate your coverage limits based on a percentage of your personal property coverage.
In other instances, renters insurance companies 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?
Insurance companies will help you pay for most of the expenses related to your temporary living situation. However, loss of use coverage doesn’t cover everything. Most notably, you can’t take advantage of loss of use coverage unless your home is damaged by a covered peril.
For example, damage caused by flooding or an earthquake isn’t covered by home insurance. Therefore, loss of use coverage wouldn’t apply if your home was severely damaged by either event. Loss of use coverage also can’t be used for things like elective renovations or general maintenance.
Most insurance companies have a list of excluded expenses. If you have to file a claim, make sure you know what those exclusions are. That way, you aren’t 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 use your additional living expense coverage, there are some things you can do to expedite the claims process:
- Save receipts for all essential expenses. This can include your rent or hotel bill, moving expenses, restaurant receipts and pet boarding fees. This will help your property insurer calculate reimbursement expenses. Having these receipts available, it could expedite the claims process.
- Check with your property insurer. When you file a claim, ask your insurance company about its claims process. Find out how long it usually takes to process, approve and reimburse your claim.
- Begin your claim online. Many insurance companies allow you to file a claim online. It’s quick, secure and convenient.
- Upload documentation. Most companies allow you to upload any supporting documentation that may be required, such as receipts and pictures.
- Make a checklist. Pay attention to any documentation the insurance company requires, and make a checklist of every step, so you don’t miss anything important.
If you forget a step or don’t provide all the required information, your claim could be delayed.
Frequently asked questions
How much is loss of use coverage?
Loss of use coverage is included in nearly every home insurance policy, and the cost is already factored into your home insurance premium. Unfortunately, you can’t drop loss of use coverage to lower your rate.
Is loss of use covered by homeowners insurance?
Yes, loss of use coverage is included in most homeowners insurance policies, except the HO-1 policy form. In order to use your loss of use coverage, your home must be damaged by a covered peril. If your claim is denied, you can’t utilize your loss of use coverage.
Do you pay a deductible on loss of use insurance?
A home insurance deductible generally applies when filing a claim, but you do not have a separate deductible for loss of use coverage. The cost of your living expenses will be reimbursed up to your policy’s limit and insurer’s approval of your expenses.