What Is Coverage D on a Homeowners Policy?
Unpack the key homeowners insurance coverage that helps with costs when you're displaced from your home after a covered incident.
Homeowners insurance provides financial protection against various risks. Understanding its components is important for safeguarding your investment. Each section addresses specific types of losses and offers distinct protections, helping ensure appropriate coverage.
Defining Loss of Use Coverage
Coverage D in a homeowners insurance policy is known as Loss of Use coverage. This part of your policy provides financial assistance if your home becomes uninhabitable due to damage from a covered event. It helps you maintain a comparable standard of living while your home is being repaired or rebuilt. This coverage activates when a “covered peril,” like a fire or severe storm, makes your residence unsafe or impossible to live in.
What Coverage D Pays For
Coverage D addresses several categories of expenses that arise when your home is uninhabitable. The primary component is Additional Living Expenses (ALE), which covers increased costs beyond your normal living expenditures. This includes expenses like hotel stays, temporary rental housing, or increased utility costs at a temporary residence. ALE also accounts for higher food costs, such as restaurant meals, if you cannot cook at home, and additional transportation expenses like increased fuel costs or public transit fees. Pet boarding fees and storage unit costs for your belongings may also be covered.
Another aspect of Coverage D is Fair Rental Value (FRV). If you rent out a portion of your home, or if your entire home could be rented, FRV coverage compensates you for the lost rental income while the property is uninhabitable due to a covered peril. This ensures landlords do not lose rental revenue during the repair period. The coverage helps replace rent checks you would have received, allowing you to cover ongoing bills like mortgage payments.
Coverage D can also include protection under “Civil Authority” provisions. This applies when a governmental authority, such as police or fire departments, prevents access to your home, even if your property itself is not directly damaged. This usually occurs because a neighboring property suffered damage from a covered peril, making your area unsafe or inaccessible. Civil Authority coverage helps pay for additional living expenses and, in some cases, lost fair rental value during the period of restricted access.
Understanding Coverage Limits and Claims
The amount of Coverage D is typically determined as a percentage of your dwelling coverage, also known as Coverage A. Common limits range from 10% to 30% of your dwelling coverage, meaning if your home is insured for $300,000, your Coverage D might be between $30,000 and $90,000. In some policies, especially for renters or condo owners, the limit might be tied to personal property coverage.
Beyond a dollar limit, Coverage D often has time limits, such as coverage for 12 or 24 months, or until the home is repaired or replaced, whichever comes first. To initiate a claim, contact your insurance company promptly once your home becomes uninhabitable. You will need to provide detailed documentation, including receipts for all additional expenses, to support your claim. Insurers may require a list of your normal living expenses to establish a baseline, as only additional costs are reimbursed.