What Is Loss of Use on Home Insurance?

Loss of Use coverage in home insurance, also known as Additional Living Expenses (ALE) or Coverage D, provides financial assistance if your home becomes uninhabitable due to a covered event. This coverage helps cover the necessary increase in living expenses incurred while you are displaced from your primary residence. Its purpose is to allow you to maintain your normal standard of living.

Understanding Loss of Use Coverage

Loss of Use coverage reimburses policyholders for extra costs when a home is damaged by a covered peril, such as a fire or severe storm, making it temporarily unlivable. This coverage aims to maintain your household’s normal standard of living, not to upgrade it. For instance, if you live in a modest home, the coverage would support a similar temporary living situation, not a luxury one.

The coverage applies only if the displacement is due to a peril covered by your specific insurance policy. For example, if your home is damaged by a flood and you do not have flood insurance, your loss of use claim would not be covered. It does not apply to voluntary renovations or power outages not caused by a covered event. Your home must be deemed uninhabitable for the coverage to activate.

Covered Expenses and Reimbursement

Loss of Use coverage covers additional expenses that exceed your normal living costs while your home is being repaired or rebuilt. These can include temporary housing, such as hotel stays or rental homes, and increased food costs, like restaurant meals if you cannot cook at home. Other common covered expenses might include temporary storage for belongings, laundry services, and extra transportation costs if your temporary residence is further from work or school.

Reimbursement is for the difference between your normal living expenses and the increased costs due to displacement. For example, if you typically spend $100 per week on groceries but now spend $300 on restaurant meals due to displacement, the insurer would cover the additional $200.

Navigating Coverage Limits and Deductibles

Loss of Use coverage has specific financial boundaries. These limits are expressed as a percentage of your dwelling coverage (Coverage A), commonly ranging from 10% to 30%. For example, if your dwelling coverage is $200,000 and your loss of use limit is 20%, you would have up to $40,000 in coverage for additional living expenses.

Policies also include a time limit for which expenses will be covered, usually ranging from 12 to 24 months. Policyholders should review their specific policy documents or consult their insurance agent to understand these limitations. While there isn’t a separate deductible specifically for loss of use, the overall claim, including loss of use expenses, remains subject to your homeowners insurance deductible, which is paid when the primary dwelling claim is settled.

The Claim Process

Initiating a loss of use claim requires careful preparation. Before contacting your insurer, gather all pertinent information and documentation, including your policy details, the date and nature of the damage, and an initial assessment confirming your home’s uninhabitability. It is important to immediately begin collecting and organizing receipts for all additional living expenses incurred.

Contact your insurance company as soon as possible to report the loss and begin the claim process. An insurance adjuster will assess the damage and guide you through submitting documentation. This includes providing proof of your additional expenses, often through receipts, and demonstrating how these costs exceed your normal living expenses. Clear and consistent communication with your insurer throughout this assessment is key to a smooth and efficient reimbursement process.