Loss of Use/Temporary Living Expenses Coverage on Homeowners Insurance
If something were to happen to the structure of your home, like fire or storm damage, and you had to temporarily relocate — where would you go? Having to temporarily relocate can add up while a home is being repaired or rebuilt. Think about expenses for rentals, moving, food costs and more! Thankfully, your homeowners insurance is equipped to help you with temporary living expenses.
What Is Loss of Use Coverage?
Loss of use coverage, also known as additional living expense or Coverage D, is defined as reimbursement for living expenses when loss of or damage to your home by a covered peril forces you to maintain temporary residence elsewhere.
For example, if your home was destroyed due to a fire and you couldn’t live there while it was being rebuilt, you’d probably need somewhere to stay for a few weeks — or even months. And that could add up. Loss of use coverage gives you peace of mind that if your home becomes uninhabitable, the cost of a place to stay won’t be coming out of your pocket.
Are you a renter? Your renters insurance typically covers you for additional living expenses as well. Just one of the many reasons why renters insurance is worth having!
What Expenses Are Covered by Loss of Use?
Now you know what loss of use coverage is — but how does it work and what’s included? It’s important to know that there are limits to what and how much loss of use coverage will reimburse you for, but usually it’s enough to help you maintain your current standard of living.
So what kind of expenses are covered by loss of use insurance? Here are a few types of expenses loss of use coverage includes:
Additional Living Expenses
- Temporary living arrangements, like a hotel or apartment
- Increased food expenses, like restaurant meals while you’re in a hotel
- Storage costs for household items
- Transportation costs for increased mileage to home
- Cost of utilities in new home/rental space
- Moving costs
- Parking fees
- Laundry costs
It’s important to know that loss of use coverage only pays for the increased expenses from temporary living costs compared to your normal standard of living. For example, if your grocery bill is $100 more expensive than your usual bill, your coverage will reimburse you for that amount. Or your loss of use coverage will only cover a rental similar to the cost of your existing home.
Be sure to check in and review your coverage D policy to confirm what you’re covered for under loss of use.
Fair Rental Value
If you rent part of your home to a tenant and the part you rent becomes uninhabitable due to a covered event, fair rental value coverage covers you for lost rent for that part of your home while it’s being repaired.
For example, if your home faces fire damage and your tenants need to find alternative living arrangements, they probably wouldn’t still pay rent for a space they aren’t occupying. But chances are you’re using part of their rent payments to pay your mortgage — fair rental value helps fill that gap so you can continue paying your expenses as usual.
Another portion of your loss of use coverage is prohibited use coverage. This coverage covers both additional living expenses and if you purchased fair rental value coverage, fair rental value reimbursements if a physical obstruction or local authority keeps your tenants from accessing your home.
What if your town was hit by a tornado and, though your home is safe from damage, the roads, service lines and surrounding area are still deemed hazardous? Your local government may keep you from going home until everything is cleaned up and safe again. If this is the case, and you and/or your tenants need to find other living arrangements, you can file a prohibited use claim.
What Happens When You File a Loss of Use Claim?
When you file a loss of use claim, you’ll usually be reimbursed for expenses rather than having the costs covered upfront. So keeping all of your receipts from the additional living expenses will be necessary. This way, your insurance company can evaluate those expenses and determine if they exceed your normal living expenses — which ensures you’re getting properly reimbursed.
Do I Have to Pay a Deductible for Loss of Use Coverage?
Does a deductible apply to loss of use claims? The answer depends on your specific insurer and your policy. But, typically, your deductible is waived for this type of claim. Keep in mind, though you might not be paying a deductible for this type of claim, you’ll still pay your deductible for personal property or dwelling claims that you might make.
How Much Loss of Use Coverage Do I Need?
Loss of use coverage is included in your homeowners insurance policy and covers the events listed on your policy, such as damage from fire, smoke, hail, wind, wildfire, falling objects, among many other types of hazards. Often, your loss of use coverage limit will be based on a percentage of your dwelling insurance. Let’s say your limit is 20% and your dwelling coverage limit is $200,000, you’d be covered for up to $40,000 under your loss of use insurance dwelling coverage.
Learn More About Loss of Use Coverage
The limit for loss of use coverage varies by company and policy, so be sure to connect with your American Family Insurance agent to learn more about how you’re specifically protected by this coverage.
All coverage options and endorsements are not available in all states, please speak to your agent on availability.