What Is Coverage D in Homeowners Insurance?

Homeowners insurance policies include Coverage D, known as Loss of Use coverage. This policy section offers financial assistance when your home becomes unlivable due to a covered event. It covers necessary additional expenses incurred while you are temporarily displaced from your primary residence, helping maintain your household’s normal standard of living.

Understanding Loss of Use Coverage

Loss of Use coverage primarily reimburses additional expenses. The most recognized aspect is Additional Living Expenses (ALE), which covers costs beyond a household’s typical expenditures due to displacement. For example, if your home is damaged and you must stay elsewhere, ALE can cover temporary housing, such as a hotel or rental apartment. It also extends to increased food costs, like restaurant meals, if you cannot cook at home, but only for the amount exceeding your usual grocery budget. Other eligible expenses include laundry services, transportation costs, pet boarding, and storage fees if personal property needs to be moved from the damaged home.

Coverage D also includes Fair Rental Value (FRV). If a portion of your insured home was rented out, such as a basement apartment, and becomes uninhabitable due to a covered peril, FRV can compensate for the lost rental income. This coverage addresses the income you would have received from the tenant, distinct from your own temporary housing costs.

Coverage D includes “Prohibited Use” coverage. This applies when a civil authority, like a local government, prevents access to your property, even if your home itself is not directly damaged. This typically occurs if damage to a neighboring property by a covered peril, such as a widespread fire or a severe storm, renders your street or neighborhood unsafe or inaccessible. This provides support for additional living costs if you are prevented from safely occupying your home.

When Coverage D Applies

Coverage D activates when damage to your home makes it uninhabitable. The damage must result from a “covered peril,” an event listed in your homeowners insurance policy. Common covered perils include fire, smoke, windstorms, hail, lightning, explosions, vandalism, and the weight of ice or snow. Water damage from sudden and accidental events, like a burst pipe, is also typically covered, but flood damage is generally excluded.

For Coverage D to apply, the damage must render your home “uninhabitable.” This means the home is no longer fit to live in, due to a lack of essential services like water, electricity, heat, or plumbing, or significant structural damage. For instance, if your kitchen is destroyed and you cannot prepare meals, or if there are no working bathrooms, the home would be considered uninhabitable. Coverage lasts for the shortest time required to repair or rebuild the dwelling, or for you to permanently relocate, up to the policy’s specified time limit (12 to 24 months).

Limits and Other Considerations

This coverage has a specific limit, often expressed as a percentage of your dwelling coverage (Coverage A). For instance, many policies set Coverage D at 10% to 30% of your dwelling coverage. If your home’s dwelling coverage is $300,000, your Loss of Use limit could range from $30,000 to $90,000. Review your specific policy to confirm this percentage and ensure it aligns with potential needs for temporary living expenses.

While Coverage D typically does not have a separate deductible, the overall claim that triggered the need for temporary relocation will still be subject to your main homeowners insurance deductible. This means you will pay that initial amount out-of-pocket before the insurer begins to cover the costs associated with the damage and your additional living expenses. Maintaining records of all additional expenses incurred, such as receipts for temporary housing, meals, and other services, is crucial for reimbursement. Insurers often reimburse these expenses after they are incurred, though some may offer partial advances. Policyholders should contact their insurer after a covered event to initiate a claim and understand the documentation and submission process required for Loss of Use benefits.