What Is Loss of Use Coverage in Homeowners Insurance?
When something in your house breaks, homeowners insurance helps you cover the cost of the repair or rebuild, as well as personal property losses. Importantly, it also covers something else you might not have thought of: costs associated with temporarily living elsewhere during rebuilding. Bills for hotel stays, gas, pet boarding, and dining out add up fast, which is why loss of use coverage matters.
A standard homeowners insurance policy will include loss of use coverage. In this article, we’ve rounded up everything you need to know about it, including what loss of use coverage is, how it works, and how to get reimbursed. We’ve also included some recommendations for the best homeowners insurance companies.
What Is Loss of Use Coverage?
Loss of use coverage, also known as Coverage D, is part of your home insurance policy. There are three main types of loss of use coverage: additional living expenses, fair rental value, and prohibited use. Additional living expenses is used most commonly among homeowners.
Additional Living Expenses
The first form of coverage reimburses you for any expenses that are incurred while living away from your home during the rebuilding process. You’ll be reimbursed for how much you spend over the normal amount you usually pay for this type of expense.
For example, if you normally spend $100 on gas per month when living at home but have to pay $150 for a longer drive to work, the homeowners insurance provider would write you a check for the $50 difference.
Covered Expenses
Each insurance company reimburses you for different expenses. Some of the most common covered expenses include:
- Temporary residence including hotels, motels, and apartments
- Transportation
- Moving expenses
- Increased grocery or restaurant bills
- Storage costs
- Laundry expenses
- Pet boarding costs
- Parking fees
- Additional fuel expenses
Fair Rental Value
Landlords who are unable to collect rent on a destroyed building are usually eligible for reimbursement of lost rent for up to 12 months after the covered loss. They’ll be given a check for the amount of rent they usually charge.
Prohibited Use
This form of loss of use coverage covers additional living expenses as well as your fair rental value for up to 30 days if the local government or a physical impediment prevents you or tenants from living on the property.
If a disaster like a tornado hits your neighborhood and the roads are hazardous, the local authority might forbid you from accessing the home. Your loss of use coverage will reimburse you for additional living expenses during that time.
What Does Loss of Use Coverage Not Cover?
To qualify for reimbursement on increased living expenses, loss of rent, or prohibited use, you must be living outside of your home due to what insurance companies call a “covered peril.” Make sure to understand what your provider defines as a covered peril before purchasing a policy or filing a Coverage D claim.
Loss of Use Limits
Loss of use coverage is expressed as a percentage of your dwelling coverage, which is based on how much your home would cost to rebuild. Most coverage is between 10% and 30% of your dwelling coverage depending on the company. For example, a 30% limit on a dwelling coverage limit of $300,000 means that you have $90,000 in loss of use coverage.
Premier home insurance companies like Chubb and AIG offer unlimited additional living expenses coverage as part of their standard policies, but it’s usually only available for high-value homes.
Do I Have To Pay a Deductible on Loss of Use Coverage?
Most companies don’t charge a deductible on loss of use coverage. Since you’re using this coverage after your home was damaged, you’ll likely have to pay the deductible when filing dwelling coverage or personal property coverage claims.
How To Get Reimbursed for Additional Living Expenses
Keep all of the receipts associated with your temporary relocation as your homeowners insurance company will need them as proof of expenses. Most providers require you to file claims every month so you’re reimbursed each time. However, if you can’t afford the additional expenses, your insurer might give you a check upfront.
You can submit a claim in one of three ways:
- Call your home insurance agent directly
- Call your insurance company’s claims department
- Fill out a claim on your homeowners insurance company’s website
Regardless of your chosen method, you’ll fill out a form detailing normal living expenses. This will be the amount you subtract from the amount you’ve spent while temporarily living elsewhere.
For loss of rental income, you’ll need to provide your homeowners insurance company with forms like tax information, lease agreements, and bank details that prove your home was a source of income before the covered loss.
Our Top Recommendations for Homeowners Insurance
We’ve evaluated home insurance companies on key metrics like coverage, cost, and customer service to help you determine the best company for your needs. Here are three of our top recommendations for homeowners insurance.
Allstate: Best Coverage Options
Allstate offers comprehensive coverage at a reasonable price along with 24/7 customer service.
Its key features include:
Your choice of 60% or 75% of dwelling for personal property coverage
24/7 customer service for claims, policy, sales, and billing questions
A rate guard endorsement that doesn’t increase your premium when you file a claim
Amica: Best Customer Service
Amica also provides extensive coverage along with common endorsements like identity fraud and water backup.
Its key features include:
A liability coverage range of $25,000 to $1 million
A mobile app, customer portal, and online chat
An endorsement for natural disasters
Lemonade: Easiest Sign-Up
Lemonade offers a technology-driven approach to homeowners insurance.
Its key features include:
Instant approvals and payments for most claims
Affordable rates starting at $25 per month
A giveback program that donates unused policy money to charities
FAQ About Loss of Use Coverage
Is loss of use coverage in every homeowners insurance policy?
Yes, loss of use coverage is included in standard homeowners insurance policies.
What is a covered loss?
A covered loss refers to an incident that caused damage to your home, leading to it being repaired or rebuilt. Common covered losses include fire, theft, and vandalism.
Does renters insurance have loss of use coverage?
Yes. As with home insurance, renters insurance policies reimburse you for living expenses if your rental is temporarily uninhabitable.
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