While you may already have a comprehensive home insurance policy in place, it’s important to fully comprehend all protections provided by your policy.
One component to pay special attention to is Loss of Use coverage (Coverage D), which provides financial assistance in the event that you are unable to live in your home due to a covered loss or damage (otherwise known as a covered peril). In this article, we’ll dive into what Loss of Use coverage covers, its limitations, and more.
- Typical expenses include temporary housing, meals, storage fees, moving costs, and other additional costs.
- Loss of Use coverage can be invoked in situations such as natural disasters, fire damage, vandalism, and government-mandated evacuations.
- Gather documentation of damage and extra expense receipts for additional living expenses to ensure your claim process goes smoothly.
What is Loss of Use coverage and what does it cover?
When an event, such as a fire or a covered natural disaster, renders your home uninhabitable, Loss of Use coverage steps in. This coverage is included in most home insurance policies and helps pay for additional living expenses (or, ALE coverage) that you may incur while your home is being repaired—or rebuilt.
Additional living expenses coverage
Loss of Use coverage typically covers additional living expenses, including temporary housing. Depending on your specific homeowners insurance policy, it may also cover the costs of utilities and transportation.
Fair rental value
If you are a landlord and had previously rented out your property, Loss of Use coverage can compensate you for the rental income you would have received during the time your property is uninhabitable.1
Typical expenses covered
Expenses add up, so it’s important to understand what Loss of Use coverage will reimburse you for—and what you may be on the hook for.
Housing
Whether it's renting an apartment, staying in a hotel, or opting for a short-term rental property, coverage extends to the cost of rent and utilities that you would typically incur in your own home.
Meals
Displacement from your home means you can't utilize your kitchen or cook meals as usual; therefore Loss of Use coverage often includes reimbursement for the additional costs of dining out or ordering takeout.
Storage fees
You may need to temporarily store your belongings. With some policies, Loss of Use coverage may cover the costs associated with renting a storage unit to safeguard your possessions during the repair process. We recommend you confirm whether or not storage is included in your policy with your agent or insurance provider directly.
Moving costs
In some cases, Loss of Use coverage can also assist with expenses related to moving into temporary lodgings, such as hiring professional movers or renting a moving truck.
When to invoke Loss of Use coverage
Knowing when to invoke Loss of Use coverage is essential for homeowners facing unexpected circumstances. Some of the usual perils that are covered by your homeowners insurance policy which enable Loss of Use coverage to be activated include the following:
- Natural disasters such as tornadoes. Windstorms and ice can severely damage your home, making it uninhabitable. However, it is important to note that perils such as flooding or earthquakes are often specifically excluded, requiring flood insurance or earthquake insurance, and therefore not covered by your homeowners insurance policy.
- Fire or smoke damage can also force you to vacate your residence temporarily, allowing Loss of Use coverage to be invoked.
- Government-mandated evacuations can be issued during emergencies, making it impossible to return to your home, allowing Loss of Use coverage to be invoked during the period of displacement.2
What damage isn’t included in Loss of Use coverage?
While Loss of Use coverage offers valuable protection, it's essential to understand its limitations and exclusions.
Not all types of damage or circumstances will qualify for Loss of Use coverage. For instance, the following types of damage are typically excluded in a standard homeowners policy Coverage D:
- Normal wear and tear
- Pest infestations
- Preventable damage
- Flooding
- Earthquakes
Coverage is also subject to both policy and time limits, meaning there is a cap on the replacement cost an insurance company will pay out (coverage limit), as well as the length of time for your claim to remain active (both of which are determined by your insurance provider).3
How much Loss of Use coverage do you need?
The amount of Loss of Use coverage you need requires evaluating several considerations, including the size, age, and location of your home.
Typically, Loss of Use coverage is set at around 10-30% of your home's insured value, or the dwelling coverage limit stated in your policy.4 This means, if your house is valued at $500,000, the cap on your Loss of Use coverage will hover somewhere in the $50,000-$150,000 range.
However, we recommend you consult with your insurance agent to determine the appropriate coverage limit based on your specific circumstances.
How to make a Loss of Use claim
Experiencing a situation where you need to invoke Loss of Use coverage can be challenging, but knowing the proper steps to make a claim can help alleviate stress.
- Contact your insurance company as soon as possible to report the loss and initiate the claims process. The claims representative will guide you through the next steps.
- Gather relevant documents that validate damage and additional living expenses, including photographs or videos, estimates or invoices for repairs, and any other supporting evidence.
- Keep records of every additional living expense, including receipts for temporary housing, meals, transportation, and other essential costs incurred.
Seek professional advice
Navigating the complexities of homeowners insurance coverage can be challenging. To ensure you have the right coverage and understand the intricacies of Loss of Use coverage, and other converge types (such as personal property coverge and liability coverage), we advise seeking professional advice and talking with your insurance agent or provider.
* We provide this information to help you understand insurance. Any coverage is subject to the terms of your policy. Please refer to your policy and declaration page for complete coverage details.
1 Dara Uhlig. “Fair Rental Value Coverage: What Landlords Need to Know.” Credible. Published 29 March 2023. Accessed 19 July 2023. https://www.credible.com/blog/home-insurance/fair-rental-value-coverage/
2 Loretta Worters. “Ordered to evacuate due to Hurricane Laura? You might have insurance coverage for additional living expenses.” Insurance Information Institute. Published 2020. Accessed 19 July 2023. https://resilience.iii.org/resilience-blog/hurricanes/ordered-to-evacuate-due-to-hurricane-laura-you-might-have-insurance-coverage-for-additional-living-expenses/
3 Sarah Schlichter. “What Is Loss of Use Coverage for Home Insurance?” NerdWallet. Published 1 November 2022. Accessed 19 July 2023. https://www.nerdwallet.com/article/insurance/loss-of-use-coverage#:~:text=Some%20
insurers%20also%20restrict%20how,months%2C%20depending%20on%20your%20policy.
4 Elizabeth Rivelli. “Loss of use coverage.” Bankrate. Published 15 March 2023. Accessed 19 July 2023. https://www.bankrate.com/insurance/homeowners-insurance/what-is-loss-of-use-coverage/
