What is Loss of Use Coverage for Homeowners and Renters?
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Loss of use coverage pays for additional living expenses or lost rental income if your home is seriously damaged and you can't live there safely.
This can include things like a hotel room, movers or extra gas to get to and from work.
Most homeowners and renters insurance policies include loss of use coverage. Your loss of use limit is usually 10% to 30% of your dwelling coverage amount for homeowners, and 20% to 30% of your personal property coverage for renters.
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What is loss of use coverage for homeowners insurance?
Homeowners insurance loss of use coverage, or coverage D, covers three main things:
Additional living expenses coverage
Additional living expenses (ALE) insurance pays your living expenses if your home is badly damaged and you can't safely live there.
For example, if your house partially burns down, loss of use coverage will reimburse you for your expenses until your home is fixed. This can include things like the cost of a hotel or rental home, movers, and even meals if you're staying somewhere without a kitchen.
Usually, your loss of use coverage limit is 10% to 30% of your dwelling coverage limit.
For instance, if your dwelling coverage limit is $350,000 and your loss of use coverage limit is 20%, your insurance company will reimburse up to $70,000 in expenses while you're living away from home.
Fair rental value coverage
Fair rental value coverage, or loss of rent insurance, reimburses you for lost rental income if damage to your rental property means you can no longer safely rent it out.
For example, if you rent out your home for $1,000 a month, that is the amount your insurance company will reimburse you under fair rental value coverage.
Most homeowners insurance companies include loss of use coverage in their policies and place a limit as a percentage of your dwelling coverage.
Prohibited use coverage
Prohibited use coverage reimburses you for expenses like a hotel or meals if the government intervenes and keeps you from accessing your undamaged home.
For instance, if tornado or wildfire damage makes it unsafe to enter your neighborhood, prohibited use coverage will cover the cost to stay in a hotel, up to a certain limit, even if your home wasn't damaged.
Keep in mind that an order to evacuate isn't enough to use prohibited use coverage. There needs to be enough damage to your neighborhood that you're unable to get to your home.
What is loss of use coverage for renters insurance?
Renters insurance loss of use coverage pays for you to to stay in a hotel or move your stuff to a storage unit while your apartment gets fixed.
These types of expenses are called additional living expenses.
Renters insurance loss of use limits are typically 20% to 30% of your personal property coverage limit. For example, if you have $30,000 of personal property coverage and your loss of use coverage limit is 20%, your insurance company will reimburse you up to $6,000.
If you live somewhere with a high cost of living, you may want to consider paying extra for higher loss of use limits. This could help you avoid a big expense if your home is seriously damaged and you need to move out for a longer period of time.
What does loss of use insurance cover?
Loss of use insurance helps pay for expenses you wouldn't ordinarily have if you were living in your own home.
This typically includes expenses like:
- Temporary housing, such as a hotel
- Movers to bring your stuff to a rental home
- Extra gas if your temporary home is further away from your job
- Cost to set up utilities in your temporary home
- Increased cost of meals if your temporary home doesn't have a kitchen
- A storage unit for any belongings that don't fit in your temporary home
For instance, let's assume you typically spend $100 on gas per month, but that amount increases to $150 because your hotel is farther from your work than your home. In this scenario, the insurance company would reimburse you for $50 worth of gas.
Remember that policy limits vary by insurance company and type of policy.** If you have questions about your specific loss of use coverage limit, it's best to ask your insurance company. You can typically increase your coverage limit at an additional cost.
Your insurance company will only pay your living expenses if a "covered peril," like a fire, damages your home.
Most insurance policies cover damage caused by:
- Fire, smoke and lightning
- Wind and hail
- Explosions
- Riots or civil commotions
- Vehicles or aircraft
- Theft or vandalism
- Freezing or weight of snow or ice
- Falling objects
- Damage from electrical currents
- Volcanic eruptions
Most insurance policies do not cover damage caused by:
- Water, including weather-related flooding or backed up sewers
- Earthquakes
- Power failure
- Neglect
- Intentional damage
- War
- Nuclear hazard
What makes a home uninhabitable for insurance purposes?
Your home is uninhabitable if it's not safe for you to live there. For example, if a tornado rips the roof off your home, it wouldn't be safe for you to continue living in it.
The insurance company also considers your home uninhabitable if damage causes you to lose electricity or running water.
Your home must be considered "uninhabitable" for the insurance company to pay your extra living expenses.
Tips for filing a loss of use claim
If damage to your home causes you to temporarily relocate, you should file a claim quickly, keep all of your receipts and prepare a list of your normal living expenses.
File your claim right away
It's important to file your claim right away because the quicker your insurance company can start investigating your claim, the faster you'll get paid.
If you're filing a claim after a widespread disaster, like a hurricane or wildfire, your insurance company may get lots of claims all at once, which could slow things down. In this situation, it could be helpful to get your claim started early so you're at the front of the line.
In addition, some insurance companies may give you an advance on your compensation for loss of use. In this case, you'll get a check much faster if you file your claim right away. Keep in mind that this isn't always the case, as some companies won't reimburse you until the claim is settled.
Keep track of your receipts
Keep receipts for anything you plan to claim as an additional living expense. Your insurance company will ask for proof of any payments you make so it can reimburse you for your costs.
You should keep receipts for any living expenses, including gas for your car, utility expenses and food. If any of these are higher than your normal expenses, you can ask the insurance company to pay the difference.
Make a list of your normal living expenses
When you file a loss of use claim, your insurance company will ask you to outline your normal living expenses. This includes things like groceries, gas and utilities. The insurance company will use this info to determine whether your current expenses are higher than your normal living expenses.
Frequently asked questions
What does loss of use coverage mean?
Loss of use coverage pays any expenses you wouldn't normally have if serious damage causes you to temporarily move out of your home. This can include a hotel room or rental home, moving expenses, extra gas to and from work, or food expenses if your temporary home doesn't have a kitchen.
Does renters insurance cover loss of use?
Yes, most renters insurance policies include loss of use coverage. This coverage can help pay for a hotel, food and other expenses if your rental home or apartment is damaged and you have to move out while it's repaired.
How much loss of use coverage do I need?
To determine how much loss of use coverage you need, you should consider how much it would cost to live comfortably outside your home for up to one year. Most home insurance policies have a loss of use limit equal to 10% to 30% of your dwelling coverage limit, while renters insurance bases your loss of use coverage off your personal property limit.
This is enough coverage for many people. But, you may want to pay extra for higher limits if you live in an area with a very high cost of living, like a major city.
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