What Is Loss of Use in Home Insurance?

Loss of use coverage in home insurance helps policyholders manage financial disruption when their home becomes unlivable due to a covered event. This protection ensures individuals are not burdened with unexpected costs while their primary residence is repaired or rebuilt. It aims to maintain a normal standard of living during displacement.

Defining Loss of Use Coverage

Loss of use coverage, also known as “Additional Living Expenses” (ALE) or “Coverage D,” provides financial assistance for increased costs when a home is uninhabitable. This covers expenses beyond typical household expenditures, allowing policyholders to maintain their lifestyle. For example, if a homeowner normally spends $100 per week on groceries but spends $300 on restaurant meals while displaced, the insurance would cover the additional $200.

Fair Rental Value (FRV) is another component of loss of use coverage. This applies to landlords whose rental property becomes uninhabitable due to a covered peril. FRV reimburses the landlord for lost rental income during the repair period.

When Loss of Use Coverage Applies

Loss of use coverage activates when home damage is caused by a peril covered under the homeowner’s insurance policy. Common covered perils include fire, windstorms, and other sudden and accidental damage. Floods or earthquakes are typically excluded unless separate, specialized policies are in place.

For coverage to apply, the damage must render the home genuinely uninhabitable. This means the home is unfit or unsafe for living, often due to a lack of essential utilities like electricity, heat, or running water, or significant structural damage. Loss of use coverage may also apply if a civil authority mandates evacuation due to damage in the surrounding area, even if the home itself is not directly damaged. It covers expenses only when displacement is necessary due to a covered loss, not for voluntary renovations or upgrades.

What Loss of Use Covers and Limits

Loss of use coverage addresses additional expenses incurred due to displacement, aiming to maintain the policyholder’s usual standard of living. Covered expenses include temporary housing (e.g., hotel stays, rental homes), increased food costs from eating out, and temporary transportation expenses (e.g., extra fuel, public transit fares). Other common covered costs can include pet boarding, laundry service, and storage unit fees for personal belongings. This coverage does not pay for regular, ongoing living expenses like mortgage payments, normal utility bills, or routine groceries, as these costs would have been incurred regardless of the damage.

Loss of use coverage usually has specific financial and time limitations. Financial limits are often set as a percentage of the dwelling coverage, commonly 10% to 30%. For example, a home with $200,000 in dwelling coverage might have a loss of use limit of $40,000 to $60,000. Time limits also apply, restricting coverage to a specified period, such as 12 or 24 months, depending on the policy.

Filing a Loss of Use Claim

Filing a loss of use claim requires prompt action after a covered event renders a home uninhabitable. Policyholders should contact their insurance provider as soon as possible to report damage and begin the claims process. The insurer’s claims representative will guide the policyholder through the necessary steps.

Maintaining meticulous records of all additional expenses is essential. This includes saving all receipts and invoices for temporary housing, meals, transportation, and any other costs exceeding normal living expenses. Insurers often require itemized receipts to validate claims and may provide a worksheet or log to help policyholders track these expenses. It is also beneficial to document the damage to the home with photographs or videos to support the claim of uninhabitability.