What Is Loss of Use Coverage on Homeowners Insurance?
Understand how homeowners insurance provides for your additional living expenses when your home is uninhabitable due to a covered peril. Learn what's included.
Homeowners insurance policies offer financial protection against various risks to a dwelling and its contents. “Loss of use coverage” addresses the financial strain homeowners might experience if their property becomes uninhabitable. This coverage helps manage unexpected costs when a primary residence cannot be occupied due to covered damage.
Defining Loss of Use Coverage
Loss of use coverage, often identified as Coverage D or Additional Living Expenses (ALE), reimburses policyholders for increased costs incurred when they cannot reside in their home due to a covered loss. This protection is a standard feature in most homeowners, condominium, and renters insurance policies. It covers expenses above a household’s normal living costs. For instance, if typical weekly grocery spending is $300, but displacement leads to $600 in restaurant meals, the coverage addresses the $300 difference. This helps maintain a comparable standard of living while their home is being repaired or rebuilt.
Covered Expenses and Scenarios
Common covered expenses include:
Temporary housing, such as hotel stays, short-term rentals, or apartments
Increased food costs, particularly from dining out due to an unavailable kitchen
Laundry services
Additional transportation costs, like increased fuel or public transit fares
Storage fees for belongings that must be moved
Pet boarding fees, if animals cannot stay in the temporary accommodation
This coverage activates when a covered peril renders the home uninhabitable or inaccessible. Scenarios often involve damage from fire, severe storms, or other events listed in the homeowner’s policy. For example, if a tree falls on a house or significant water damage from a burst pipe makes the home unsafe, loss of use coverage applies. The coverage can also extend to situations where civil authorities mandate an evacuation due to damage to nearby properties from a covered cause, even if the policyholder’s home is not directly damaged. This coverage applies only when displacement is due to a peril covered by the policy; events like floods or earthquakes are typically excluded unless specific additional coverage is purchased.
Understanding Coverage Limits and Duration
Loss of use coverage is subject to specific limitations outlined in an insurance policy. The financial limit is commonly a percentage of the dwelling coverage, often 10% to 30%. For example, a home insured for $300,000 might have a loss of use limit between $30,000 and $90,000. For renters or condominium owners, the limit might be a specific dollar amount, such as $3,000 to $5,000, or a percentage of their personal property coverage.
Beyond the financial limit, there is a time limit for benefits. This duration is generally for the “shortest time required to repair or rebuild the dwelling” or until the policyholder finds a permanent residence. Policies often specify a maximum period, typically 12 to 24 months. Coverage ceases once the home is deemed habitable, even if repairs are ongoing. Policyholders remain responsible for normal recurring expenses, such as mortgage payments and regular utilities, as these are not covered by loss of use.
Initiating a Claim
Contact the insurance company as soon as possible to report the incident and initiate the claims process. Early notification can help expedite the process, particularly during widespread disasters. Document the damage to the home thoroughly, including photographs or videos, and estimates or invoices for repairs.
Maintain meticulous records of all additional expenses incurred due to displacement. Save all receipts for temporary housing, meals, transportation, and any other qualifying costs. Insurers typically require these receipts for reimbursement, as coverage is provided on an “after the fact” basis. Preparing a list of normal living expenses can also be helpful, as insurers use this baseline to determine eligible “additional” costs. Consistent communication with the claims adjuster is important to clarify covered expenses and understand next steps.