Not all home repairs are quick and easy. Sometimes the damage is so severe that you need to leave your home until it is repaired. When that happens, expenses can pile up—especially if you’re away for several days or weeks. Fortunately, the Loss of Use coverage portion of your homeowners insurance policy may cover such incidents.
What is loss of use coverage
Loss of Use coverage is a standard part of your homeowners insurance that helps pay for your living expenses when you’re unable to live in your home after a covered loss. For example, if a fire severely damages your home, you may have to move into a hotel while repairs are being made. If this happens, your insurance company could reimburse you for your hotel bill, your meals and any other reasonable living expenses.
Also known as Additional Living Expenses (ALE) coverage, Loss of Use coverage works the same way whether you have a home, condo or renters policy. Your policy also lists this protection as Coverage D.
Coverage limits
Generally speaking, your Loss of Use coverage limit will be 20 percent of your Dwelling coverage amount. For example, if you have $300,000 of Dwelling coverage, your Loss of Use coverage limit will be $60,000.
Some carriers may also have a time limitation on the coverage. In other words, your Loss of Use coverage will only apply for a certain number of days. Be sure to read your policy to confirm what it covers.
Covered perils
An insurance peril is an event that may damage your home or belongings. A covered peril means that your homeowners insurance will pay to repair any damage caused by one of these events. While covered perils vary by state, here are the perils that are typically covered by your homeowners insurance:
- Fire
- Lightning strikes
- Wind
- Hail
- Falling objects
- Weight of ice or snow
- Vandalism
- Theft
What is covered by loss of use
If you couldn’t live in your home, where would you go? More importantly, how much would it cost, and could you afford it? From the cost of housing and food to items like transportation, pet boarding and laundry, expenses can certainly add up.
This is where Loss of Use coverage can help. Here’s what it typically covers:
| Item | Details |
| Temporary housing | Loss of Use can help pay for your lodging in a hotel, motel, apartment or even a rented house until repairs on your home are complete. |
| Food and meals | If you move to a hotel with no kitchen, you’ll have to eat out more. Loss of Use can cover the increase in spending above your normal food budget. |
| Transportation | Loss of Use can pay for any increase in transportation expenses, such as gas, parking fees and public transit fees. |
| Moving and storage | You may need to move or store your possessions until you can return home. Loss of Use can reimburse you for this added cost. |
| Pet boarding | If your pets need a place to stay while you’re displaced, Loss of Use can help pay for a kennel. |
| Increased utilities | If your electric bill is higher than usual in your temporary home, Loss of Use can help cover the added cost. |
It’s important to note that Loss of Use coverage will only pay the difference between your previous living expenses and your new temporary expenses. For example, while Loss of Use coverage may pay your hotel bill, it won’t pay your mortgage payment.
What is not covered
While Loss of Use insurance covers a lot, it won’t protect you in every situation. For example, the coverage only applies when your home is damaged in a covered peril. Therefore, if your home was severely damaged in a flood, Loss of Use wouldn’t apply because home insurance doesn’t cover flood damage. For that, you would need a separate flood insurance policy.
Here are some examples of what Loss of Use coverage will not cover:
- Costs related to fixing pre-existing damage
- Routine costs (e.g., normal groceries, insurance, mortgage, childcare)
- Damage caused by floods or earthquakes
- Items unrelated to living expenses (e.g., personal debts)
- Non-essential luxury items
- Elective renovations or general maintenance
How does loss of use coverage work
Let’s say your home is badly damaged by a covered peril, such as a fire or storm. If this happens, the standard parts of your homeowners insurance policy will kick in to help you get back on your feet. This includes your Dwelling, Other Structures, Personal Property and Loss of Use coverages.
When will I be reimbursed for my expenses?
When it comes to your Loss of Use payment, most insurance carriers will reimburse you as part of your claim’s final settlement—after all expenses have been incurred. Your carrier will want to see documentation of these expenses when you file your claim. That’s why it’s so important to keep all receipts and carefully track all expenses related to your temporary housing and increased living costs.
What happens if I don’t have the financial means to stay in a hotel?
Insurance carriers want to make sure you have a place to stay after a disaster. For example, if your credit cards were destroyed in a home fire, most carriers will set you up in a hotel, usually through a partnership they have with a hotel vendor.
