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Understanding Loss of Use Home Insurance Coverage

Published Nov. 8, 2021
Christy Bieber
By: Christy Bieber

Our Insurance Expert

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Every property owner needs enough homeowners insurance coverage to avoid financial loss. Loss of use coverage is an important type of homeowners insurance that pays for any additional expenses incurred while property is being repaired after a covered loss. Learn more about this type of insurance and why it's necessary in this guide.

What is loss of use on a homeowners insurance policy?

When determining what is covered by your homeowners insurance policy, it's important to answer the question "What is loss of use coverage?"

Loss of use coverage is a type of protection included on standard homeowners insurance policies that pays for financial loss if a home is damaged or destroyed by a covered hazard. It can help pay for things like:

  • Living costs if the homeowner has to live elsewhere while the home is repaired
  • Food and laundry expenses
  • Parking and gas costs
  • Pet boarding

What is additional living expenses (ALE) insurance?

The term "additional living expenses (ALE) insurance" is often used interchangeably with loss of use coverage. So is the phrase "Coverage D."

ALE insurance pays for additional costs incurred because a covered property becomes unusable. For example, if a home has burned down, the policyholder may need to live in a hotel or apartment, and they have to pay to eat out more frequently. They might also have additional fuel costs if their temporary home is farther from work. Or they might even need to board their pet while they're out of their permanent home. These extra expenses would be covered by ALE insurance.

What does loss of use protection cover?

Loss of use insurance covers many kinds of losses that occur when a property is damaged by a covered cause such as a fire. Here are some of the things loss of use home insurance may pay for.

Additional living expenses

If a property owner incurs expenses due to covered damage, loss of use coverage pays those costs.

This can include things like:

  • Meals out if a kitchen is damaged
  • Hotel accommodations or rent while a home is repaired or rebuilt
  • Boarding a pet while a home is being repaired or rebuilt
  • Extra parking, gas, or commuting costs
  • Laundry services

Fair rental value

When a landlord has an insured property that is damaged by a covered cause, loss of use coverage can pay for the rent they miss out on while the home can't be rented.

Prohibited use

If the government prohibits the use of a covered property, loss of use insurance may pay for costs the property owner incurs as a result. For example, if the government declares roads impassable after a storm and won't let a policyholder go to their undamaged home, loss of use insurance could pay for the resulting financial costs while the home is inaccessible.

What is not covered by loss of use insurance?

Here are some of the common things that loss of use insurance doesn't cover.

Repairs to a dwelling or personal property

Loss of use coverage doesn't pay to repair or rebuild a home or personal property. Other parts of a home insurance policy, such as dwelling and personal property coverage, will pay for these losses. Most policyholders should make sure they have replacement cost insurance. This pays what it costs to replace a damaged home or possessions, rather than just paying their fair market value, which may be lower than the cost to rebuild.

Most standard home insurance policies exclude flood damage. This means loss of use home insurance generally will not pay for any costs a policyholder incurs after a flood. Homeowners should consider purchasing separate flood insurance protection.

Pest infestations

Many times, homeowners can't use their home temporarily if they have an infestation. They may need to find alternate accommodations while the home is fumigated. Loss of use coverage usually excludes costs resulting from pest problems.

Unreasonable expenses

Loss of use insurance pays reasonable living expenses. Homeowners can't expect insurance to pay for a five-star hotel, rent on a mansion, or meals out at expensive steakhouses every night.

How much loss of use home insurance do you need?

You may be wondering "How much loss of use coverage do I need?" Here's what you need to know.

Homeowners need enough insurance to ensure additional living expenses can be covered if a home is damaged. Frequently, the amount of coverage is limited to between 20% and 30% of the value of the covered dwelling. A few insurers provide unlimited loss of use coverage. For those who would face high costs if displaced from their home, it may be worth looking for one of these insurers.

Is there a deductible for loss of use coverage?

Deductibles are usually waived for loss of use coverage. However, it's important to read individual insurance policy documents, as this can vary by insurer.

How to claim loss of use to your insurance company

Homeowners should refer to their policy documents for specific instructions. Each policy will explain how to make a loss of use claim.

In general, homeowners need to report their covered loss right away. They will need to track reasonable life expenses and keep receipts. Homeowners will submit their claim along with documentation and should receive a payment for their expenses. Usually, policyholders are reimbursed on a monthly basis for the prior month's expenses.

Learn more: Guide to Homeowners Insurance

FAQs

  • Yes, loss of use coverage is standard in most homeowners insurance policies. It's often referred to as Coverage D. Policyholders should check their policy for coverage limitations and to see how much loss of use coverage they have.

  • Loss of use coverage pays for additional costs a renter incurs if their apartment becomes temporarily uninhabitable. It covers additional costs for:

    • Accommodations
    • Commuting
    • Dining out and laundry
  • Policyholders can be reimbursed for reasonable living expenses when a home is damaged by a covered cause. Homeowners must keep receipts to document the additional costs they incur. This documentation will need to be submitted to an insurance company.

  • Homeowners insurance premiums generally increase after making a claim. This includes loss of use home insurance if policyholders make a claim for additional living expenses when a home is damaged.

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