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. It is a standard feature of most homeowner, renter, condo, and mobile home insurance policies. 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.

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?

In most cases, loss of use insurance will cover:

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

Keep in mind that loss of use insurance covers expenses that are in excess of 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 kicks in 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 rent an apartment while remodeling your kitchen, your insurance company will not cover additional living expenses because your policy does not cover home improvements.

Uselessness Insurance is intended to assist you in maintaining your current standard of living, not to provide you with an upgrade. So, if you live in a one-bedroom apartment, don't expect your insurance company to rent you a four-bedroom house with a pool.

Furthermore, loss of use will not compensate you for ongoing expenses that you were already paying, such as your mortgage. It will also not pay for things covered by other parts of your policy, such as property damage 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.