What is loss of use coverage?

Loss of use coverage provides financial assistance if you are unable to live in your home due to a covered reason. Most homeowner, renter, condo, and mobile home policies include it. It usually consists of three parts:

Additional living expenses

If your home becomes uninhabitable due to a covered reason, such as a fire, additional living expenses coverage pays for hotel stays and other costs. Depending on your policy limits, this coverage may pay out until your home is completely repaired or you relocate permanently.

Because additional living expenses coverage is the most well-known component of loss of use coverage, the terms are frequently used interchangeably.

Fair rental value

Damage to your home may affect more than just you and your family. If you rent out a portion of your space, your tenant may be required to vacate during repairs, resulting in less rental income for you. Loss of use coverage may assist you in recouping that amount.

Prohibited use

Loss of use coverage can be beneficial if your home is inaccessible, even if it is not physically damaged. For example, if police have blocked off your street due to downed power lines, or if your city will not allow evacuees to return after a hurricane until the worst local damage has been addressed, it could pay for a hotel.

What does loss of use cover?

Insurance for loss of use typically covers:

• Hotel stays.
• Apartment or house rentals.
• Restaurant meals.
• Groceries.
• Pet boarding.
• Transportation or parking costs.
• Laundry expenses.
• Moving and storage costs.

Remember that loss of use insurance covers expenses above and beyond your normal cost of living. Assume you normally spend $100 per week on groceries, but you eat out more frequently while staying in a hotel. If your total food costs rise to $300 per week, your insurer will cover the additional $200.

Keep all of your receipts, as insurance companies frequently reimburse you after the fact rather than paying you up front.

What’s not covered

Loss of use coverage only pays out if the reason you're living somewhere else is covered by your policy.

Flood damage, for example, is typically not covered by homeowners or renters insurance. So, if your first floor is flooded and you don't have flood insurance, your carrier will not pay for you to stay somewhere else.

Similarly, if you're renting an apartment while remodeling your kitchen, your insurance company will not reimburse you for additional living expenses because your policy does not cover home improvements.

Loss of use does not cover ongoing expenses that you were already paying, such as your mortgage, nor does it cover items covered by other parts of your policy, such as damage to your property or a lawsuit filed against you.

Loss of use coverage limits

The amount of additional living expenses coverage you have is frequently determined by limits in other parts of your policy. A homeowners policy's loss of use coverage amount is typically set to a percentage of your dwelling coverage limit, such as 20%. So, if your home's structure is insured for $300,000, your loss of use limit is $60,000.

Renters and condo owners may have their loss of use limit tied to their personal property limit instead.

Some insurers also limit the length of time you can rely on loss of use coverage. For example, depending on your policy, your additional living expenses may only be covered for up to 12 or 24 months.

How to file a loss of use claim

File promptly. The sooner you file your claim, the sooner it will be settled and you will be able to resume your recovery. Keep in mind that if your claim is for a widespread disaster, such as a hurricane or wildfire, your insurance company may be inundated with claims. In these cases, if you can get your claim in ahead of the crowd, it may be settled more quickly.

Many companies allow you to begin your claim online or via their app, while others require you to call.

Keep all receipts. In the aftermath of a disaster, some companies may offer you a partial advance on your additional living expenses. Others will pay you back after the fact. In either case, you'll need to keep track of how much money you spend while living away from home.

Include receipts for even minor expenses like gas or public transportation. You could be reimbursed if you spend more money on commuting because your hotel is farther away from work than your home.

Keep track of your regular living expenses. Because loss of use insurance is intended to cover extra living expenses, your insurer may request a list of your standard living expenses as a baseline. Prepare to estimate how much you typically spend on items such as food, utilities, transportation, and housing (such as your rent or mortgage).