Home Insurance Insights
What Is Loss of Use Coverage?
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Home Insurance Insights
Loss of Use Coverage, also called Coverage D or Additional Living Expenses Coverage, is included in most homeowners, condo unit owner, and renters insurance policies. It is usually set in motion if a home is declared uninhabitable due to damage by a powerful storm, house fire, burst pipe, break-in, or other catastrophic covered event. What makes a home “not fit to live in” often varies based on state, county, and/or city building code standards. In most cases, though, a property is considered unliveable if essential services, like water, electricity, heat, or plumbing, are unavailable.
In addition, the area of a home where the loss occurred and the impact those damages might have on the people living there helps determine if the property is still habitable. For example, if the kitchen is inaccessible, there are no working bathrooms, and/or bedrooms are unusable due to damages caused by a covered event, Loss of Use Coverage usually applies.
If your insurance adjuster determines that your home is unlivable and that the only safe and practical option is to move out while it is being worked on, Loss of Use Coverage typically helps pay for any necessary incremental living expenses you incur as a result, including:
This coverage may also apply if you decide to live in a mobile home on your property rather than go to a hotel, as well as to items you now require at your home, like a power generator, as a result of a loss such as damage to your electrical system. In addition, if you own a multifamily house and lease one side of your home, this coverage may reimburse the lost rent your tenant does not pay you while they are displaced due to the covered event.
However, Loss of Use Coverage will not pay for expenditures you were responsible for prior to your home being damaged. For example, if you are a homeowner, you still need to pay your monthly mortgage fee, utility bills, and other routine expenses. Additionally, your insurance company typically will set a limit for how long they will pay additional living expenses. If your home is under repair or being completely rebuilt, your insurance company may estimate how long it customarily takes for this type of work to get done and limit your coverage to that timeframe. Or, if you decide to relocate permanently, your carrier may estimate the amount of time it will take for your family to settle elsewhere and only provide coverage for that period.
For homeowners, the Loss of Use Coverage limit is set by calculating a percentage of your Dwelling Coverage limit. Whereas, if you are a condo unit owner or a renter, this limit is typically based off a percentage of your Personal Property Coverage limit.
In the event you do have to move out of your home after a covered event, it is important to keep thorough records of all your costs and hold onto every receipt. Doing so not only facilitates the claims process but also may help you keep track of your expenditures so that you do not spend beyond your coverage. Any expenses over and above your policy limit will have to come out of pocket, so you should make sure your Loss of Use Coverage amount is sufficient to help you maintain your current standard of living while you are temporarily relocated.
If you would like to know more about Loss of Use Coverage, and the amount, terms, and limits included in your current policy, please contact one of the local insurance agencies in The Andover Companies network. Together, you and your agent may determine it is worth the minimal additional cost, and gives you more peace of mind, to increase this critical coverage.
Dwelling Coverage is often considered the most critical component of home insurance. It is designed to cover the physical structure of your home, including permanent fixtures and any attached structures.
Whether you select a Named Perils or Open Perils insurance policy can affect which risks your home and its contents are protected against. It is important to know how they differ and what coverage you have.
Most properties are best insured by an HO-3 or HO-5 policy because both policies include six essential home insurance coverages. The key difference is in the coverage they provide for personal belongings.
Standard homeowners, condo unit owners, and many renters insurance policies typically provide Personal Property Coverage, which is critical protection to have if belongings are damaged or stolen.
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