What does loss of use insurance cover

Homeowners insurance covers your dwelling, personal property, and liability expenses if you're sued. But if your home is damaged and temporarily unlivable, you'll need a place to stay while undergoing repairs. Additional living expenses, like hotel stays, and restaurant bills, can add up. Loss of use coverage is available to cover any expenses related to alternative living arrangements. 

What is loss of use coverage?  

Suppose your home becomes temporarily inhabitable due to damage. In that case, homeowners insurance offers loss of use to help with relocation costs and other temporary living expenses. While "loss of use" and "additional living expenses" are often used interchangeably, it is not the same. Additional living expense coverage is just a fraction of your loss of use coverage. 

There are three parts to loss of use: 

• Additional living expenses: Additional living expense insurance covers "any necessary increase in living expenses incurred by the insured to allow the household to maintain their normal standard of living," says Mario Iveljic, founder of Mag Mile Law and licensed insurance broker at Power Risk Management and Insurance in Chicago. Loss of use will reimburse you for additional expenses that your insurance provider would not have ordinarily covered if you lived in your home, according to Iveljic. For instance, if you usually spend $200 a month on food but are now spending $400 because you can't cook and have to eat out more, your provider would reimburse you for the additional $200. A few examples of costs that qualify for reimbursement include expenses related to public transportation, pet boarding, groceries and dining, moving costs, storage costs for household items, and parking fees. 
• Fair rental value: If you have a tenant in your home and a listed peril damages the room you rent out, fair rental value coverage will compensate you for the loss of rental income. 
• Prohibited use: If your home is not accessible because of damage from neighboring premises by a covered peril, or if the government prevents you from using your property, loss of use will issue additional living expenses or fair rental value reimbursements for up to two weeks, according to Iiveljic. 

What does loss of use coverage cover?

Your homeowners insurance policy will enact loss of use coverage if your home is uninhabitable due to a covered loss. Here are several perils that a standard homeowners policy will usually include: 

• Fire
• Water
• Theft
• Vandalism
• Hail, wind, lightning
• Damage by a falling tree

Note that how you receive "loss of use" compensation will vary on your provider. Some carriers will reimburse you for temporary housing, while others have a list of housing alternatives.

If you're considering leaving your damaged home, call your insurance agent first to determine if they will compensate you for temporary living expenses based on your situation. It is important not to assume that you'll receive a payout of additional living expenses as what qualifies as a home being "uninhabitable" will vary based on the provider. 

Quick tip: If your provider does not provide the same level of service you expected, consider switching to a new one. Start your search by visiting Insider's top picks for homeowners companies in 2022. 

What does loss of use coverage not cover?

Loss of use will not cover any expenses that you were paying before the damage, such as your mortgage, property taxes, and property insurance, according to Iveljic. You can only use loss of use if you can no longer live in your home due to a peril listed in your policy. Here are a few damages that loss of use does not cover: 

• Maintenance and repair
• Floods
• Earthquakes

How much loss of use coverage do you need?

According to the Insurance Information Institute, the coverage amount will vary based on your insurance company. Some providers may offer an unlimited amount of coverage for a duration of time, while others only have limits.

Generally, your loss of use coverage amount is automatically set to 20% of your home's insured value. For instance, if your coverage amount is $250,000, your loss of use coverage amount will be $50,000. You can increase your coverage by purchasing additional loss of use insurance.

Unlike dwelling coverage, you do not have to pay a deductible to receive loss of use compensation. 

How to file a claim for loss of use coverage 

• Contact insurance company: Make your insurance company aware of the damage and ask about the stipulations to receive compensation for additional living expenses. Each insurance company has different protocols on how they disperse payments. 
• Determine your regular living expenses: Consider keeping a record via bank statements or receipts of your normal living expenses even before you experience a loss. Your insurance provider will usually have you fill out an application detailing your average monthly spending on essential expenses. Figure out what this budget is before filing a claim. 
• Keep all receipts: Save receipts related to additional living expenses. Usually, your insurance provider will reimburse you for the cost of additional living expenses rather than pay you upfront. "If you can't prove what your expenses would have been without a loss and what they are following a loss, it will be hard to convince the insurance carrier to reimburse you for your extra costs," says Iveljic. 
• Begin claim process: File a claim with your insurance company and upload your receipts. Your insurance company will compare your after-loss living expenses with your before-loss living expenses to determine whether your expenses surpass your average living budget and if an expense is deemed "necessary" and "essential." 

Loss of use coverage pays for additional living expenses you incur if your home is not suitable to live in due to a covered loss. It's important to note that loss of use covers the excess of what you normally spend for certain things. For instance, let's say your home is damaged by fire. You're unable to use your kitchen to cook, so you've been eating your meals at a restaurant. Your tab at the restaurant was $600 for the week, but you normally spend $300 weekly for groceries. Your loss of use coverage will pay out the difference of $300.

Examples of loss of use/additional living expenses include:

• Temporary housing (hotel or rental home)
• Additional fuel costs
• Additional utilities
• Additional food expenses (groceries, restaurants, cooking supplies)
• Storage units
• Boarding of pets
• Laundry
• Moving costs
• Public transportation fees
• Parking fees

Limits on loss of use coverage

On a homeowners policy

Loss of use coverage on home insurance policies typically offer 10% or 20% of your dwelling coverage. For example, if you have $200,000 in dwelling coverage, you'd be covered up to $20,000 or $40,000 in the event of a covered loss, depending on your policy.

On a condominium policy

Typically, condo insurance policies will provide loss of use coverage that is equal to 20% of your combined dwelling coverage and personal property coverage limits. For example, if you have a $60,000 limit for dwelling coverage and a $30,000 limit for personal property coverage, your loss of use coverage limit will be $18,000.

On a renters policy

Depending on your insurance company, loss of use on renters insurance may be a flat amount (between $3,000 and $5,000) or a percentage of your personal property coverage. At ASI, one of the insurers in Progressive's network and part of our family of companies, you're covered up to 40% of your personal property limit. That means if you have $100,000 in personal property coverage, you will have up to $40,000 in loss of use coverage.

Loss of use coverage on a rental property

Landlords may be eligible to be reimbursed for lost rental income through their loss of use coverage if their tenants are unable to reside in the dwelling due to a covered loss (lease cancellations are not covered). ASI offers loss of use coverage options of $0, 10%, or 20% of your dwelling coverage.

Pro tips for loss of use claims

Check your limits: Some insurers only offer loss of use coverage for a certain amount of time after a covered loss. This may depend on your state, so check with your insurer to see if any time limits apply.

Know what expenses qualify: Generally, you're only covered for expenses that are considered "normal." You may want to verify with your insurer in advance if your expenses qualify. Additionally, if you plan on staying at a certain hotel because you’re unable to live in your home due to a covered loss, check with your insurer to make sure there won't be any reimbursement issues for that hotel.

Keep receipts for all your additional living expenses: Your insurer typically requires you to submit copies of your receipts for review prior to issuing a reimbursement check.

Continue to pay your mortgage or rent: Loss of use coverage will not cover your mortgage or rent payment during the time you’re unable to live in your home due to a covered loss.

Ask for help: If you need assistance finding a place to stay, your insurance company can usually help. Being displaced from your home is never easy, and your claims representative can help ease the transition.

Get a home insurance policy with loss of use coverage