Loss of use coverage

Your homeowners insurance policy includes several types of coverage that protect your home and possessions from covered disasters. One of these coverage types is loss of use, which pays for expenses incurred while your home is temporarily uninhabitable as a result of damage caused by a covered claim. You should understand what loss of use is, what it covers, its limitations, and how to get reimbursed in order to make the best use of this critical coverage.

What is loss of use coverage?

Loss of use coverage, also known as additional living expenses (ALE), is included in most homeowners insurance policies. This protection is also listed as Coverage D in your policy.

Loss of use coverage pays for necessary expenses while you are unable to live in your home as a result of a covered claim. Instead of paying for things like an extended hotel stay and daily restaurant visits out of pocket, loss of use coverage is designed to reimburse you for those costs.

Loss of use coverage applies only when your home is damaged as a result of a covered peril. For example, if your home was severely damaged in a flood, loss of use coverage would not apply because home insurance does not cover flood damage and flood policies do not cover loss of use.

There are also limitations to this coverage. For example, on a $200,000 policy, your policy may only carry up to 30% of the dwelling coverage, which could be up to $60,000. Talk to your insurance provider about your policy and what level of coverage is appropriate for your needs.

How does it work?

Assume that a large portion of your home is destroyed by a wildfire, rendering it uninhabitable for an extended period of time. Your homeowner's insurance would cover the cost of rebuilding as well as any personal belongings lost in the fire. Furthermore, your loss of use coverage would assist in covering your temporary living expenses, such as hotel or Airbnb stays, food, pet boarding, parking fees, and other costs.

Your insurance company may handle the payment for loss of use in a variety of ways. Some insurance companies, such as Safeco, may be able to provide immediate assistance in the form of a cash advance against the settlement of your claim, while others may assist you in finding and paying for a rental property or other temporary lodging.

Meanwhile, keep track of all receipts for your normal living expenses so that you can be reimbursed by your insurance company later through the final settlement of your claim.

What does loss of use coverage cover?

Loss of use coverage reimburses you for the majority of your living expenses while you are unable to live in your home. The fundamental coverages are as follows:

  • 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)

Each insurer provides slightly different types of coverage, so check with your insurance provider to see what items are covered under your loss of use policy. Find out if there are any restrictions, such as a maximum benefit amount for temporary living expenses.

Most insurance companies offer loss of use coverage ranging from 10% to 30% of the insured value of your home. So, if your dwelling coverage (or coverage A) is $300,000, your loss of use benefits will be limited to $30,000 to $100,000. However, some insurers may have limitless loss of use coverage, so check your policy declarations page to see how your insurance works.

Loss of use coverage for condos

Condo insurance also provides loss of use coverage. If your condo unit is damaged and you must relocate, your HO-6 condo policy will provide you with additional living expenses coverage. Some insurance companies may combine your dwelling's value with your personal property coverages to calculate your loss of use coverage limit.

Loss of use coverage for rentals

The same coverage applies to renter's insurance policies in that loss of use coverage assists you in maintaining your standard of living while you wait to re-enter your rental. Your coverage limits are calculated by insurance companies as a percentage of your personal property coverage.

In other cases, renters insurance companies may pay you a lump sum as specified in your policy. Speaking with your insurance provider to learn more about how they calculate your benefit amount is a good rule of thumb.

What does loss of use coverage not cover?

Insurance companies will usually assist you in covering the majority of the costs associated with your temporary living situation. However, loss of use coverage is not comprehensive. Most importantly, you cannot use loss of use coverage unless your home has been damaged by a covered peril.

Home insurance, for example, does not cover damage caused by flooding or earthquakes. As a result, if your home was severely damaged by either event, loss of use coverage would not apply. Loss of use coverage is also ineligible for elective renovations or general maintenance.

Most insurance companies have a list of expenses that are not covered. If you need to file a claim, make sure you understand the exclusions. That way, you won't waste money on an expense only to discover later that they won't cover it.

How to get reimbursed for additional living expenses

If you need to use your additional living expense coverage, you can speed up the claims process by doing the following:

  1. Keep receipts for all necessary expenses. Rent or hotel bills, moving expenses, restaurant receipts, and pet boarding fees are examples of such expenses. This will assist your property insurer in calculating reimbursement costs. Having these receipts on hand could help to speed up the claims process.
  2. Check with your property insurance company. When filing a claim, inquire about your insurance company's claims process. Learn how long it takes to process, approve, and reimburse your claim.
  3. Start your claim online. You can file a claim with many insurance companies online. It is quick, safe, and convenient.
  4. Documentation should be uploaded. Most businesses allow you to upload any necessary supporting documentation, such as receipts and photographs.
  5. Create a checklist. Pay close attention to any documentation required by the insurance company, and create a checklist of each step to ensure you don't overlook anything important.

If you skip a step or fail to provide all of the required information, your claim may be delayed.