When the worst-case scenario happens to your home, and you don’t have a homeowners insurance policy, you’ll be on the hook for the cost of repairing or rebuilding your home, replacing your personal belongings, and something else you might not have thought of—the costs associated with temporarily living outside of your home during rebuilding. In a short amount of time, you can rack up hefty bills for hotel stays, gas, pet boarding, and eating out.
Luckily, a standard homeowners insurance policy will cover these costs in the part of the policy called loss of use coverage. In this article, the This Old House Reviews Team has rounded up everything you need to know about loss of use coverage, including what it is, how it works, and how to get reimbursed. We’ve also included some of our recommendations for the best homeowners insurance companies.
What is Loss of Use Coverage?
Loss of use coverage, also known as Coverage D, is a part of your home insurance policy. There are three main types of loss of use coverage, with the first type being the most common for the average homeowner.
Additional Living Expenses
The first form of coverage reimburses you for any expenses you incur while living outside of your home during its rebuilding process. You will be reimbursed for how much you spend over the normal amount you usually pay for this type of expense.
For example, if you usually spend $100 on gas per month when living at home but have to pay $150 due to having to drive a farther distance to work, your homeowners insurance provider would write you a check for the $50 difference.
Different insurance companies will reimburse you for different expenses. Here are some of the most common covered expenses:
- Temporary residence, including hotels, motels, and apartments
- Moving expenses
- Increased grocery or restaurant bills
- Storage costs
- Laundry expenses
- Pet boarding
- Parking fees
- Additional fuel expenses
Fair Rental Value
Landlords who are unable to collect rent because their building is destroyed are usually eligible for reimbursement of lost rent for up to 12 months after the covered loss occurs. You will be given a check for the amount of rent you usually charge.
This form of loss of use coverage covers your 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 your tenants from living on your property.
For example, if a disaster like a tornado hits your neighborhood, and the roads are hazardous, the local authority might forbid you from accessing your home. Your loss of use coverage will reimburse you for additional living expenses during that time.
What Does Loss of Use Coverage Not Cover?
In order to be reimbursed for increased living expenses, loss of rent, or prohibited use, you must be living outside of your home due to a covered peril. Make sure you understand what your provider defines as a covered peril before purchasing a policy or filing a Coverage D claim.
Keep in mind that you can’t spend money on superfluous items and expect them to be covered. For example, you can’t stay in an expensive five-star hotel or eat at Michelin-star restaurants.
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.
Do I Have to Pay a Deductible on Loss of Use Coverage?
Most companies don’t charge a deductible on loss of use coverage, but 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 this proof to corroborate your expenses. Most providers require you to file claims every month so that you’re reimbursed on a monthly basis. However, if you cannot 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 the method you choose, you’ll be directed to fill out a form detailing what your normal living expenses are. 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 that prove your home was a source of income before the covered loss like tax information, lease agreements, and bank information.
Our Top Recommendations for Homeowners Insurance
The This Old House Reviews Team has evaluated many home insurance companies on key metrics like coverage, cost, customer service, and more to help you determine the best company for your needs. Here are three of our top recommendations for homeowners insurance.
Allstate: Best Overall
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 claim rate guard endorsement that doesn’t increase your premium when you file a claim
Amica: Best Liability Coverage
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–$1 million
- A mobile app, customer portal, and online chat
- An endorsement for natural disasters
Lemonade: Quickest 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 a month
- A Giveback program that donates unused policy money to charities