Be prepared. This is a good adage to take with you through life, and it extends to your home insurance.
When something happens to your home, like a fire or a burst water pipe, there are a variety of expenses besides just the cost of repair, and the cumulative cost could be crippling. If you’re unable to use your home as a result of an accident or incident, for instance, you may have to sleep at a hotel, eat out at restaurants and pay extra gas mileage since the hotel is further from your work.
Loss of use coverage pays for these sorts of additional expenses when they’re brought on by a peril covered in your home insurance policy. Other terms used to refer to this type of insurance policy are additional living expenses and coverage D.
The cost of staying in a hotel while your house is out of commission is one example of an additional living expense. Coverage D, on the other hand, refers to the section of your home insurance policy in which the additional living expenses are laid out.
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Each insurance provider may vary slightly in the expenses that they cover. However, there are some baseline costs that most insurance companies will likely include:
If you are a landlord, your loss of use policy will also cover the rent money that you lost.
Loss of use coverage also applies when you are prohibited from using your home. Maybe there was a hurricane in your neighborhood and even though your house is not damaged, the government deems it unsafe to return to the area. Loss of use insurance applied in this situation.
It is important to note that loss of use home insurance only covers the additional expenses that you would not ordinarily have.
So, let’s say that your home has had a fire and you are staying in a hotel with no kitchen. You have to eat out at restaurants, which costs $200 per week. Usually, you would spend $100 a week at the grocery store. Loss of use insurance will not pay the full $200.
Instead, it will pay the difference between what you normally spend, and what you now need to spend: $200 – $100 = $100 paid by the insurance provider.
Some of your living expenses will not be increased due to your situation, like childcare. Such costs are also not covered.
Another important thing to note is that this type of coverage must be within reason. The additional spending must be only what is necessary. So staying at a five star hotel, or eating at luxury restaurants will not be covered.
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Loss of use home insurance is very common. Almost every homeowners insurance policy has loss of use embedded in it, the only exception being HO-1.
Although the loss of use coverage is in nearly every house insurance policy and covers an extensive amount of perils, it does not cover them all.
For instance, if your house floods then you will not receive loss of coverage from your house insurance provider. Instead, you will need to have flooding insurance with loss of use coverage embedded.
Other examples of perils not typically included in housing insurance policies include pests and earthquakes.
Within the loss of use coverage embedded in your home insurance, there will likely be a cap.
This means that you can only claim up to a certain amount. Typically this amount will be a percentage of your home’s value. Often this percentage is between 10-30%. So, if your home is worth $200,000, and your loss of use caps at 20%, then you can claim up to $40,000 as additional living expenses.
If your house has a fire and your car is damaged as well, the cost of the car’s repairs is not an additional living expense. That will need to be taken up with your car insurance policy.
But car insurance policies can also include loss of use coverage. Checking with your provider is a good idea so you can get an understanding of what is covered and what is not.
For those who do not own their homes, you can also get loss of use coverage on renters insurance.
Make sure you check your insurance policy to see whether you have a loss of use coverage. Check how much it covers.
Speaking with your insurance provider can provide clear insight into the extent of your coverage and prepare you for covered perils before they arise.
There is typically no deductible for loss of use coverage but again, contacting your insurance provider is the best way to know exactly how your coverage works.
Although we hope that you never need to file a loss of use claim, if that situation does arise, you’ll want to ensure that you keep records of everything.
Keep records of how much you spend on things like food and gas mileage on a regular basis. Then, if something happens to your home, keep track of your additional living expenses. This means keeping receipts so that you can prove the increased spending created by your covered peril, and your insurance provider knows exactly how much to reimburse you.
While keeping track of your expenses, be in communication with your insurance provider. They will help to ensure that you are following all the appropriate steps.
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Loss of use in home insurance is normally embedded within your home insurance policy. It will likely cap at between 10-30% of your home’s value, depending on your plan and provider. It will cover additional expenses caused by the inability to use your home such as a hotel or motel stay, extra food costs, extra fuel mileage, and more.
The amount of coverage needed will vary from person to person. It depends on the value of your insured possessions and on your lifestyle. Typically, 10-30% of your possession’s value is a good benchmark.
