Home Insurance

What Is Loss of Use Coverage?

Loss of use coverage can help you pay for reasonable essential expenses if your home becomes temporarily uninhabitable.

What Is Loss of Use Coverage

Loss of use coverage can pay for hotel stays, meals, and other essential expenses if your home becomes temporarily uninhabitable because of a covered peril. This provides some protection if your home suffers serious damage from a fire, natural disaster, or another catastrophe that makes you unable to safely live in it while it’s being rebuilt or repaired.

Though many people never consider what they would do if their home became unlivable, it is something all homeowners should consider. For example, there were an estimated 34,200 residential fires per year caused by heating alone from 2017-2019, resulting in an average $367 million in property loss. 

Dwelling insurance would cover repairs to the structure of your home in the event of a catastrophe, but loss of use coverage protects against the other expenses that come from being unable to live at home. Depending on how long the repairs or rebuilds take, expenses like rental costs could add up.

How Does Loss of Use Coverage Work?

Loss of use coverage, also called additional living expense (ALE) insurance or Coverage D, typically works on a reimbursement basis, meaning that you need to pay for your expenses first, and your insurance company will pay you back after the fact. If you need to make a claim, it’s important to log your expenses and save your receipts to get the appropriate reimbursement.

These claims can help you pay for reasonable essential expenses if your home becomes temporarily uninhabitable. “Uninhabitable” is typically defined as being unfit to live in due to health or safety issues, or a lack of necessities like running water, heat, electricity, and sanitary facilities. Structural damage to your home, like a collapsed roof, may also make it uninhabitable due to the potential danger it creates.

Loss of Use Is Part of Your Homeowners Insurance Policy

Loss of use coverage is typically included in your standard home insurance policy and has already been factored into your premium, so there’s no need to worry about making a separate payment.

While every insurer is different, it’s common for standard policies to have coverage of 10% to 30% of your dwelling’s insured value. In this case, if your dwelling coverage (also called Coverage A) was $400,000, then your loss of use benefits may be somewhere between $40,000 to $120,000. However, some companies provide more coverage and others may even offer unlimited loss of use coverage as a feature.

To find out what your policy includes, check your declaration page. You can also read more in the details section of your home insurance policy, or contact your insurance agent for additional information. If you don’t have an agent, you could reach out directly to your insurance carrier. If you are still shopping for a homeowners insurance policy, be sure to find out what is covered for loss of use expenses, whether you have a deductible to consider, and if there are any specific limitations on your coverage.

How to File a Loss of Use Claim for Reimbursement

If you have to use your loss of use coverage, start by contacting your insurance company to learn about their claims process. In many cases, the insurance company will put you in contact with a representative to help you file your claim. The amount of time between filing a claim and receiving your reimbursement check varies, so ask your representative for a general timeline.

To ensure your claim is processed efficiently, save all of your receipts during the time you are unable to live in your home. This includes your temporary lodging bills if you are staying at a motel or temporary apartment, and even meal and grocery receipts in some cases. You may need them to validate your expense claims. As coverage depends on policy terms, make sure to ask your representative about what documentation they require and make a checklist of each step.

What Does Loss of Use Coverage Include?

Loss of use covers the additional costs that are required for you to maintain your standard of living while your home is being repaired or rebuilt. This means when your home becomes uninhabitable, this coverage is designed to reimburse you for any expenses you incur that are above and beyond your normal living expenses. These commonly include:

  • The cost of residing in a hotel, motel, apartment, or another rental living arrangement
  • Additional fuel expenses if the move extends your work commute
  • Laundry expenses if you don’t have access to a washer and dryer
  • Costs associated with moving your items to storage
  • Parking fees if required by your temporary residence
  • Pet boarding fees if necessary while you’re away from your home
  • Costs for meals beyond your normal spending, such as the cost of eating at restaurants instead of cooking at home

Having to unexpectedly leave your home and find other accommodations can be very stressful, but knowing you have coverage to help with the costs may help alleviate some of the burdens. However, only expenses that are in excess of what you would normally spend while living at home will be eligible for loss of use coverage. For example, it will not cover your normal rent or mortgage.

What Are the Limitations of Loss of Use Coverage?

Loss of use coverage typically excludes damage caused by earthquakes and floods. In these cases, your home may become unlivable, but you may not receive any reimbursement for loss of use. Many insurers also exclude damage caused by negligence or lack of maintenance. In addition, you cannot claim this coverage for voluntary home renovations or general maintenance projects that require you to temporarily live elsewhere.

Even if the cause is covered, loss of use reimbursement does not reimburse for everything. This makes it important to clearly understand your coverage any time you think you might have to file a claim. For example, loss of use coverage only reimburses you for extra money spent due to the loss of use of your home. For example, if you typically spend $150 a week on groceries and you spent $200 eating out while you stayed in a hotel, your coverage would likely only reimburse you for the extra $50.

This coverage also doesn’t include expenses you were already responsible for before the loss, such as your property taxes, mortgage payment, and home insurance payments.

How Much Loss of Use Coverage Do I Need?

When thinking about your coverage, consider the cost of living in your area, particularly hotel and rental costs. Everyone’s insurance needs and living situations differ, and as such you may want to change the amount of your loss of use coverage.

In some cases, the coverage in your standard policy may not be enough. Some insurance companies allow policyholders to increase their loss of use coverage to meet their needs. However, you typically cannot reduce your premium by lowering the loss of use coverage from the standard default. If you’re concerned about your current coverage amount, contact your insurance agent or a company representative to discuss your options.