What Is Considered Loss of Use on Homeowners Insurance?
Discover how homeowners insurance covers additional living costs when your home becomes uninhabitable due to a covered event.
Homeowners insurance policies often include “loss of use” coverage, providing financial support when a home becomes uninhabitable due to a covered event. This coverage helps policyholders with additional costs incurred when they cannot reside in their primary residence, acting as a financial safety net during displacement.
Understanding Loss of Use Coverage
Loss of use coverage, also known as Coverage D or Additional Living Expenses (ALE), is a standard part of most homeowners insurance policies. It activates when a home becomes uninhabitable due to a covered peril, helping pay for expenses that exceed normal living costs during repair or rebuilding. It does not cover regular expenses like mortgage payments, property taxes, or typical utility bills, as these would be incurred regardless of displacement.
ALE addresses increased costs for policyholders living elsewhere, allowing them to maintain their normal standard of living. Fair Rental Value (FRV) coverage reimburses homeowners for lost rental income if a portion of their home, such as a basement apartment, becomes uninhabitable due to a covered peril.
Types of Covered Expenses
Loss of use coverage helps with various additional expenses when a home is unlivable. Temporary housing is a common covered expense, including costs for hotel stays or the rental of a temporary apartment or house. If a household typically prepares meals at home but must now eat out due to lack of kitchen facilities, the increased cost of restaurant meals beyond the normal grocery budget can be covered. For instance, if weekly groceries typically cost $100, but dining out costs $300, the $200 difference may be reimbursed.
Additional transportation costs are also frequently covered, such as increased gas expenses or public transit fees if the temporary residence is farther from work or school. Policyholders should meticulously track mileage and related fuel costs to substantiate these claims. Other specific expenses that may be covered include laundry services if a washer and dryer are unavailable, pet boarding fees, and the cost of renting storage units for belongings that do not fit in temporary housing. Fair Rental Value (FRV) covers lost rental income from a tenant-occupied portion of the home if it becomes uninhabitable due to a covered loss.
Navigating a Loss of Use Claim
Initiating a loss of use claim requires prompt action and thorough documentation. Policyholders should contact their insurance provider as soon as their home becomes uninhabitable due to a covered peril. Early notification can expedite the claim process and allow for immediate assistance. It is important to keep detailed records of all additional expenses, saving every receipt for items like temporary housing, meals, and transportation.
Insurers typically require proof of these expenditures to process reimbursement. Maintaining a log of expenses, including dates, amounts, and reasons for each cost, can significantly aid the claims process. Policyholders should also be prepared to provide documentation of their normal living expenses to establish a baseline, as only costs above this baseline are covered. Loss of use coverage usually has limits, often expressed as a percentage of the dwelling coverage (e.g., 10% to 30%), and may also have duration limits, typically 12 to 24 months. Understanding these policy limits is crucial to avoid unexpected out-of-pocket costs and effectively manage expectations during the displacement period.