What Is Loss of Use on a Homeowners Policy?
Understand Loss of Use coverage on your homeowners policy: what it is, what it covers when your home is uninhabitable, and how to utilize it.
A homeowners insurance policy protects your dwelling and personal property. Beyond these core protections, many policies include “Loss of Use” coverage. This provision offers financial assistance when circumstances force you from your home, managing unexpected costs that arise when your residence becomes temporarily uninhabitable due to a covered event.
Understanding Loss of Use Coverage
Loss of Use coverage, also referred to as Additional Living Expenses (ALE) or Coverage D, is a standard component within most homeowners insurance policies. It activates when a covered peril, such as a fire, storm damage, or a burst pipe, renders your home unsafe or uninhabitable. This coverage aims to help maintain your normal standard of living by covering the additional costs incurred during your displacement.
This provision typically covers a range of expenses that exceed your normal living costs. These include temporary housing, such as hotel stays or the rent for a temporary apartment. Coverage may also extend to increased food costs, like restaurant meals, if you cannot cook at home. Other common covered expenses encompass temporary storage for personal belongings, pet boarding fees, and additional transportation costs, such as increased fuel or public transit expenses.
The intent is to cover only the extra expenses you incur because you cannot live in your home, not your regular bills. For instance, if you normally spend $100 on groceries weekly but spend $300 on restaurant meals due to displacement, the coverage would typically reimburse the $200 difference. This distinction ensures that the insurance covers the financial burden directly resulting from the loss of use of your home.
Coverage Limitations and Exclusions
While Loss of Use coverage offers significant support, it comes with specific limitations and exclusions that policyholders should understand. Policies commonly impose both a maximum dollar amount and a time limit for this coverage. The dollar limit is often a percentage of your dwelling coverage, typically ranging from 20% to 30%, though some policies may offer higher percentages or “actual loss sustained” options. Time limits can vary, with many policies providing coverage for 12 to 24 months, or until the home is repaired or rebuilt, whichever comes first.
Coverage is strictly tied to a “covered peril” as defined in your policy. This means if your home becomes uninhabitable due to an event not covered by your homeowners insurance, such as a flood or earthquake (unless you have separate policies for these), Loss of Use coverage will not apply. Similarly, it does not cover situations like voluntary evacuation, damage from routine wear and tear, or issues arising from a lack of maintenance.
Certain expenses are generally not covered, as they are considered part of your normal living costs. These typically include your regular mortgage payments, utilities you would pay regardless of displacement, and non-essential or luxury spending. The coverage is designed to maintain your standard of living, not to upgrade it. Therefore, it is important to distinguish between additional necessary expenses and those you would incur anyway.
Preparing for a Loss of Use Claim
To prepare for a Loss of Use claim, thoroughly review your homeowners insurance policy. Understand its specific Additional Living Expenses (ALE) limits, terms, and requirements. Knowing your policy’s specifics clarifies coverage, prevents unexpected out-of-pocket costs, and ensures you receive entitled benefits.
Document damage to your home immediately after the incident. Photographs and videos of affected areas provide visual evidence supporting your claim. This documentation helps establish the damage extent and why your home is uninhabitable, aiding communication with your insurer and adjusters.
Meticulous record-keeping for all additional expenses incurred is essential. Save every receipt for temporary housing, restaurant meals, storage fees, pet boarding, and other extra costs. An organized system for these receipts, perhaps chronological, streamlines the claim submission process. Contact your insurance company as soon as possible after the incident to report the loss and inquire about initiating your ALE claim.
Navigating the Claim Submission
Submitting and managing your Loss of Use claim involves ongoing communication and organized documentation. Submit collected receipts and supporting documentation to your insurer for reimbursement. Many insurers operate on a reimbursement basis, meaning you pay for expenses upfront and then get repaid.
Throughout displacement, maintain regular communication with your insurance adjuster. They provide guidance on qualifying expenses and advise on temporary living arrangements. Some insurers may offer assistance in finding temporary housing. This dialogue helps ensure expenditures align with policy guidelines and facilitates a smoother claim experience.
Additional Living Expenses are typically reimbursed after you submit documentation. The insurance company reviews your submitted receipts and determines the amount owed. Continue paying your regular mortgage and utility bills for your damaged home, as these are generally not covered by Loss of Use. Coverage typically continues until your home is habitable again, or until your policy’s dollar or time limits are reached.