What Is Loss of Use in Homeowners Insurance?
Understand how homeowners insurance covers additional living expenses when your home is uninhabitable after a covered event. Learn about this vital financial protection.
Loss of use coverage in homeowners insurance provides financial assistance when a residence becomes uninhabitable due to a covered event. This coverage, often referred to as Additional Living Expenses (ALE) or Coverage D, helps policyholders maintain their normal standard of living by covering increased costs incurred while displaced from their home.
Understanding Loss of Use Coverage
Loss of use coverage is a standard feature included in most homeowners insurance policies. This coverage is triggered specifically when damage results from a peril covered by the policy, such as fire, windstorms, or certain types of water damage. It does not apply if the damage stems from an uncovered peril like floods or earthquakes, unless specific additional insurance is purchased. A home is generally considered uninhabitable if it lacks essential services like heat, plumbing, or electricity, or if it fails to meet local habitability codes.
The coverage is intended to cover only the increase in living expenses, not the homeowner’s regular costs like mortgage payments or grocery bills. Most policies establish limits for loss of use coverage, often expressed as a percentage of the dwelling coverage, ranging from 10% to 30%. For instance, if a home has $300,000 in dwelling coverage, loss of use might be capped at $30,000 to $90,000. There may also be time limits, such as 12 months, for which expenses will be covered, or coverage may cease once the home is repaired or the dollar limit is reached.
Qualifying Expenses
Temporary housing is a primary covered expense, including costs for hotels, motels, or temporary rental properties. The covered amount for housing is the difference between the usual housing costs and the temporary accommodation cost, not the full cost of the temporary residence. Increased food costs are also commonly covered, reimbursing for restaurant meals or additional grocery expenses beyond what would normally be spent if cooking at home.
Other qualifying expenses include increased transportation costs, such as extra mileage or public transport fares due to a longer commute from the temporary residence. If personal belongings must be moved from the damaged home, storage unit fees are reimbursable. Pet boarding costs may also be covered if pets cannot stay in the temporary accommodation. Additionally, if the homeowner remains responsible for utilities at the damaged property and incurs new utility costs at the temporary residence, the increased utility expenses might be covered.
Claiming Your Benefits
Initiating a loss of use claim requires prompt action and meticulous record-keeping to ensure proper reimbursement. The first step involves contacting the insurance company immediately after the covered loss makes the home uninhabitable. This notification starts the claims process and allows the insurer to provide guidance on subsequent steps and necessary documentation. Early reporting can also be beneficial, especially after widespread disasters, as it may help expedite the claim.
Maintaining detailed records of all additional living expenses is paramount for reimbursement. Policyholders should save every receipt for costs like hotel stays, temporary rental agreements, restaurant bills, and storage invoices. These receipts serve as proof of expenditure and are essential for validating the claim. The insurance adjuster plays a central role in assessing the damage and approving Additional Living Expenses, often requesting a comparison of pre-loss normal living expenses to the new, increased costs. Once documentation is gathered, it is submitted to the insurance company, often through online portals or directly to the adjuster, for review and reimbursement.