If your policy covers damage to your home and you are required to vacate it while it is repaired, where would you stay? Could the cost of a hotel or a temporary apartment be accommodated within your budget? Loss of use coverage, which is typically included in homeowner’s insurance policies, can assist. If your home is damaged as a result of a covered loss, loss of use coverage may help pay for temporary housing and living expenses while your home is repaired or rebuilt.
What Is Homeowners Insurance’s Loss of Use Coverage?
Loss of use coverage, also known as additional living expenses (ALE) insurance or Coverage D, can help cover the additional costs associated with reasonable housing and living expenses if a covered event renders your home temporarily uninhabitable during repair or reconstruction.
Additional Living Expenses (ALE) Insurance – What Is It?
ALE insurance compensates homeowners for additional living expenses incurred as a result of a covered loss. For instance, if your home is severely damaged in a fire, your loss of use coverage will reimburse you for the cost of a hotel room up to the amount specified in your policy.
Numerous homeowners insurance companies include loss of use coverage in their policies and set a deductible as a percentage of the dwelling coverage. For instance, if your limit is 30% and your dwelling coverage limit is $200,000, your loss of use coverage would cover you up to $60,000 in total. Because policy limits vary by insurance company and policy, you should contact your insurance representative if you have any questions about your specific loss of use coverage limit. Typically, for an additional fee, you can increase your coverage limit.
The loss of use coverage applies only to damage to your home caused by covered perils. For example, if your home is flooded and you do not have flood insurance, your loss of use claim will be denied.
What Is Covered by Loss of Use Protection?
As previously stated, loss of use insurance typically covers additional living expenses incurred as a result of a covered loss. In simpler terms, this means that you would be covered for expenses that you would not normally have if you lived alone. For instance, suppose you normally spend $100 per month on gas, but that amount has increased to $150 because you are staying in a hotel farther from work while your home is being repaired. In this case, you would receive a reimbursement of $50 for the incremental cost. The following is a list of common additional living expenses that are typically covered by loss of use insurance.
- Expenses associated with temporary housing, such as a hotel or motel.
- Utilizing public transport.
- Pet boarding.
- Additional expenses for food.
- If you rent your home or a portion of it and it becomes unlivable as a result of a covered loss, Travelers will compensate you for the rental income you lose. Bear in mind that your insurance company will not cover expenses such as utilities that are not incurred during this time period.
What Is Not Protected by Loss of Use Insurance?
Loss of use insurance does not cover expenses for which you were already liable prior to the loss. You will continue to be responsible for mortgage payments, insurance, and child care costs, among other things. The critical point to remember is that loss of use coverage compensates you for additional expenses incurred as a result of your inability to live in your home.
For instance, if your family typically spends around $200 per week on food but is now staying in a hotel without a kitchen, you may find yourself eating out for the majority of your meals. You’re spending $300 per week on eating out. The $100 additional expense per week would be covered under loss of use coverage.
Is a Deductible Required for Loss of Use Insurance?
Other aspects of your claim may be subject to a deductible. Your homeowners insurance representative can explain your deductible in greater detail and assist you in determining which additional coverages to add to your homeowners policy. The objective is to ensure that you have coverage that is appropriate for your circumstances.
How Much Coverage for Loss of Use Do I Need?
Each individual’s insurance requirements are unique. Typically, loss of use coverage is based on your dwelling coverage and is calculated at approximately 20% to 30% of the dwelling coverage limit. Consider whether this amount is sufficient to cover any necessary increases in living expenses if your residence is not habitable during the repair or replacement process.
Consult your insurance agent about your specific policy to determine the amount of loss of use coverage you have; this is contingent upon the policy’s terms and conditions.
From offering liability protection to you and your family to helping you get reimbursed for personal property damage, auto insurance provides many types of coverage. Learn more about Home-Owners Insurance Coverage or get a free home owners insurance quote from Klimes Insurance today.