What Does Loss of Use Cover in Home Insurance?
Understand how home insurance's Loss of Use coverage helps with extra living expenses when your home becomes uninhabitable due to a covered event.
Homeowners insurance policies provide financial protection against various perils that can damage a home. Beyond covering the physical structure, these policies often include Loss of Use coverage, also known as Additional Living Expenses (ALE). This coverage helps homeowners maintain their normal standard of living if their home becomes uninhabitable due to a covered event. It addresses the increased costs incurred when a family cannot reside in their primary residence.
Understanding Loss of Use Coverage
Loss of Use coverage reimburses policyholders for the increase in living expenses when they are displaced from their home due to a covered loss. This covers costs that are above what a household would normally spend. For example, if a family eats out due to displacement, the coverage pays for the difference in food costs.
Common expenses include temporary housing, such as hotel stays or rental homes. It also covers increased food costs, temporary storage fees, pet boarding, laundry services, and additional transportation expenses. This coverage aims to maintain a comparable standard of living during the displacement period.
Loss of Use coverage does not cover a policyholder’s regular living expenses. This includes ongoing mortgage or rent payments, normal grocery bills, and utility bills for the damaged home. The coverage specifically targets the additional expenses directly resulting from not being able to live in the home. Non-essential discretionary spending also falls outside this coverage.
When Loss of Use Coverage Applies
Loss of Use coverage activates when a home is deemed “uninhabitable” due to damage from a peril covered by the homeowners insurance policy. Covered perils commonly include fire, windstorms, and vandalism. However, perils such as floods or earthquakes are generally excluded unless specific endorsements are added.
A home is considered uninhabitable if it lacks basic services like hot and cold running water, electricity, or heat, or if it poses safety risks. Extensive repairs that disrupt daily life, or conditions that violate local housing codes, can also render a home unlivable. For example, if a kitchen or the only bathroom becomes unusable due to damage, it may trigger coverage depending on the household’s normal lifestyle.
Coverage can also be triggered by a civil authority clause, which applies when a governmental entity prohibits access to an area due to a covered peril that has damaged nearby property. Civil authority coverage typically has specific conditions, such as the damaged property being within a certain proximity, and may have a waiting period or limited duration, commonly 14 to 30 days.
The duration of Loss of Use coverage typically extends for the shortest time required to repair or rebuild the damaged property, or until the household can reasonably re-establish itself in a permanent residence. Policies usually specify a maximum dollar amount or a time limit, which can range from 12 to 24 months. This coverage limit is often a percentage of the dwelling coverage, commonly ranging from 10% to 30% of the home’s insured value.
Navigating a Loss of Use Claim
Initiating a Loss of Use claim requires prompt action. As soon as a covered loss renders the home uninhabitable, contact the insurance company. Document the damage thoroughly and note the exact date of displacement. This immediate notification helps streamline the claims process.
Maintaining meticulous records of all additional expenses incurred is essential for reimbursement. Save every receipt for temporary lodging, meals, laundry services, and any other extra costs. Create a detailed log of these expenses, noting dates and descriptions for each. Differentiating between normal living costs and the additional expenses is crucial, as only the latter are covered.
Work with the assigned insurance adjuster. Policyholders will submit collected receipts and expense logs for review and processing. In some cases, direct billing for temporary housing might be possible, or the insurer may provide advance payments. The adjuster will assess the submitted documentation to determine reimbursable amounts.
Loss of Use coverage, like other parts of a homeowners policy, is subject to policy limits. These limits, whether a specific dollar amount or a time duration, apply to the total reimbursement available. The standard home insurance deductible also applies to the overall claim, encompassing both property damage and additional living expenses. Understanding these parameters ensures a smoother navigation of the claim process.