If your home is damaged by a fire, you may need to find somewhere else to stay temporarily—and the additional living expenses can add up quickly. Happily, most home insurance and renters insurance policies include “loss of use” coverage.
What is loss of use coverage?
If your home becomes uninhabitable, you may need to pay for another place to stay, such as a hotel. You may also need to pay for meals at restaurants. Your living expenses will probably be higher than usual. That’s where loss of use coverage may come into play.
Loss of use coverage—also called “additional living expenses” or Coverage D—may pay the difference between your previous living expenses and your temporary expenses while your home is being fixed or reconstructed. (If you have tenants who need to move out of your property, loss-of-use coverage may also cover your lost rental income.)
How does loss of use coverage work?
Your policy’s loss of use coverage limit is a specific portion of your home’s insured value, usually 20 to 30 percent. Let’s say your dwelling coverage limit is $350,000 (your home’s insured value), and your loss of use coverage limit is 30 percent. You’d be eligible for reimbursement of up to $105,000 in expenses. Anything beyond that would come out of your own pocket.
Some important notes:
Loss of use insurance kicks in only for damage covered by your home or renters insurance policy. So, if your place is damaged by a fire, loss of use coverage may be available to you. However, if your home develops mold or gets infested by bed bugs—perils that aren’t covered by most insurance policies—loss of use may not be available to you.
Loss of use insurance also applies when there are situations of “prohibited use”—essentially, circumstances in which the government prohibits you from living in your home. If a severe storm hits and causes major damage to your neighborhood, for example, authorities may prevent residents from entering the area for safety reasons. If homes near yours were damaged (even if yours is spared), you could file a claim under your loss of use coverage because you were displaced.
To submit a loss of use insurance claim, you’ll need proof of expenses. Keep good records—and all of your receipts—to ease the process.
Does renters insurance include loss of use coverage?
Yes. Most renters insurance policies reimburse you for additional living expenses if you are forced to leave your home because of damage that’s covered under your policy.
What does loss of use insurance cover—and not cover?
Loss of use insurance typically covers expenses that you wouldn’t have if you were living in your own home. This generally includes:
Hotel or motel bills.
Rental fees for a temporary apartment stay.
Costs to set up a temporary home, such as utility set-up fees.
Restaurant tabs and other additional meal expenses.
The cost of any increased mileage in your commute to and from work.
Storage unit costs.
How do I get home or renters insurance with loss of use coverage?
AAA Insurance offers home and renters insurance with loss of use coverage at affordable rates. Contact an agent today to find a policy that’s right for you and get a free insurance quote.