Loss of use coverage is valuable if your home is damaged and you need to pay for temporary housing while repairs are done. It pays bills related to extra living expenses during this time. Having the best home insurance can help ease the financial burden while you’re waiting to move back into your home or permanently relocate.
What Is Loss of Use Coverage?
Loss of use coverage is a component of a home insurance policy that pays for additional housing costs and living expenses when your home is uninhabitable due to a problem covered by your homeowners policy. It’s included in standard homeowners insurance and renters insurance policies.
Suppose you’re forced into temporary living quarters following a tornado or fire. Loss of use coverage would reimburse you for the additional costs of renting a home or staying at a hotel, up to your policy limits.
What Does Loss of Use Cover?
Loss of use coverage also called additional living expenses coverage, can reimburse you for many types of expenses, such as:
- Temporary housing, which could include a hotel, a reasonable rent charged by family members you’ve moved in with, or even an RV you’re renting in order to stay close to your property during repairs.
- Grocery and restaurant bills.
- Laundry service.
- Pet boarding if your temporary housing doesn’t accept pets.
- Storage.
- Mileage related to a longer commute because your temporary home is farther away from work.
- Mileage related to places you must visit for your rebuilding effort, such as furniture and flooring stores.
- Moving costs to get back into your house when it’s ready.
Loss of use coverage only reimburses you for expenses that are above and beyond those you would incur if you lived at home.
At the same time, loss of use coverage should reimburse you for expenses based on your usual standard of living. If you had been living in a small two-bedroom house, you won’t be reimbursed for renting a large five-bedroom house.
It’s also possible that you could receive reimbursement for loss of rental income. For example, if you normally rent a portion of your house but can’t do so because of damage to the house, loss of use coverage might pay you an amount equivalent to fair rental value.
What Does Loss of Use Not Cover?
Loss of use coverage doesn’t reimburse you for mortgage payments, insurance or child care costs.
It also generally won’t pay if your home isn’t damaged but you decide to live elsewhere during an extended power outage.
Loss of use coverage doesn’t pay for all of your food, housing and other costs. It covers the extra expenses of living in a temporary location.
It also doesn’t pay for all of your food, housing, travel and other costs. It covers the extra expense of living in a temporary location.
When Does Loss of Use Coverage Kick in?
In most cases, loss of use coverage kicks in when your home is uninhabitable due to severe damage from a problem that’s covered by your policy. These issues may include:
- Damage resulting from snow, ice or sleet
- Explosions or falling objects
- Fire, including wildfires
- Vandalism
- Water damage, such as damage from a burst pipe, not related to flooding
- Wind damage, including hurricane wind
- A mandatory evacuation ordered by civil authorities
You can make a claim on loss of use coverage if a civil authority orders a mandatory evacuation of your area—even if your house is never damaged. This can happen when a wildfire or hurricane is approaching your area. Keep this in mind if you live in an area where an evacuation might occur. You do not need to go to a shelter or bunk with family members during a mandatory evacuation if your loss of use coverage will pay for a hotel (assuming a hotel room is available). But the claim on loss of use coverage will go on your claims history.
How Much Loss of Use Coverage Do I Need?
The amount of loss of use coverage listed in a home insurance policy is typically equivalent to about 20% of your home’s insured value. If you have $300,000 in dwelling coverage, your loss of use coverage could be $60,000, or 20% of the dwelling coverage.
Some homeowners policies might limit the coverage period instead of limiting the dollar amount. For example, home insurers in Colorado must cover loss of use for up to 12 months, but Colorado homeowners must be offered the option of 24 months.
If you have renters insurance, coverage may be limited to a flat amount of a few thousand dollars or a percentage, such as 40%, of your personal property coverage. In that case, a renters insurance policy with $100,000 in personal property coverage and 40% loss of use coverage would cover up to $40,000.
You may be able to increase the loss of use coverage if you believe your current policy limits will be insufficient.
How Do I File a Loss of Use Coverage Claim?
Understand the Limits of Loss of Use Coverage
Before filing a loss of use home insurance claim, make sure you understand what is and isn’t covered. Knowing what’s covered can help you make decisions that will keep your costs within the coverage limits of your insurance policy.
For example, if you’re eating hotel meals, you won’t be reimbursed for 100% of your meals. Your average food spending before the damage will be used to figure out how much is an extra expense. If your hotel room has a kitchen, you might not be eligible for any extra expenses related to restaurant meals.
Ask for a Cash Advance
Your insurance adjuster may be able to arrange for cash advances of anticipated extra expenses. If you can’t afford to pay for extra expenses and then wait for insurance reimbursement, make sure to ask for a cash advance. For example, you may need to buy clothes if yours were destroyed.
Ask Your Insurance Adjuster for Help with Housing
Your insurance adjuster can likely help you find appropriate housing. Insurance companies work with vendors who supply housing for loss of use claims, such as house rentals and extended-stay hotels.
Money from Loss of Use Coverage Cannot Be Used for a Different Part of the Claim
If you do not spend all of your loss of use claim maximum, the extra money is not transferred to other parts of your claim, like your claim for personal property damage. Claims for these coverage types are treated separately, with their own maximums listed in your policy, and money does not transfer among the coverage types.
In fact, you may have an insurance adjuster for your loss of use claim and a different adjuster for your dwelling and/or personal property claims.
If your loss of use coverage has a time limit but not a monetary cap, there’s no reason to agree to housing that’s below your standard of living in order to conserve money. For example, if your family was living in a five-bedroom house with a pool, you can use a loss of use claim to rent a comparable five-bedroom house with a pool.
Save Receipts
Keep all receipts related to expenses you incur that fall under your loss of use coverage and document all spending. You will need to submit copies of receipts before you will receive a check for reimbursement. In fact, you may want to open a separate bank account for loss of use reimbursement and spending, to help track these expenses separately from your other personal expenses.
Professional Help With Large Home Insurance Claims
If you’ve suffered a devastating loss of your house and belongings, consider hiring a public adjuster. These adjusters work for you, not the insurance company. They can help you navigate the claims process and understand what you’re entitled to, including loss of use claims.
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