Understanding the Loss of Use Coverage in Home Insurance Policy
Your home insurance helps reduce the costs of repairing your home or replacing damaged items after a peril. Home insurance loss of use coverage is a policy that is usually included in your homeowners or renters insurance. Managing a sudden peril can be difficult. This policy helps to make the situation more bearable. It pays out additional living expenses when your home becomes uninhabitable due to an insured loss. You can also be reimbursed transportation costs while your vehicle undergoes repair or replacement after an insured peril occurs.
What Is Loss of Use Coverage?
Loss of use coverage, also known as Coverage D, is designed to minimize upkeep expenses if your home is damaged by an insured peril and it becomes uninhabitable until it is repaired or rebuilt. This coverage helps provide additional living expenses like hotel or hostel fees, food, transportation, and other expenditures that would not have occurred if your home were not damaged.
Your insurance company will only pay out this coverage for two categories: additional living expenses and fair rental value.
- Additional living expenses are the basic expenses like food and transportation that you wouldn’t have incurred if you were at home.
- Fair rental value covers your shelter needs, such as the reimbursement of hostel or hotel fees while your own home is undergoing reconstruction.
How Does Loss of Use Insurance Work?
This coverage works by paying out a percentage of the costs incurred for meeting any unexpected expenses after your home becomes temporarily uninhabitable due to an insured peril. Once you file a loss of use claim, you must maintain your receipts for all the expenses incurred like hotel or rental home charges, grocery or restaurant bills, gas charges, and storage fees. You will be requested to show receipts of the expenses you incurred before being reimbursed for the necessary expenses. You may not be reimbursed if you show receipts for a purchase that is deemed unnecessary in the current situation.
Loss of use coverage comes in handy for homeowners who are still paying off their mortgages. Damage to your home does not exclude you from the mortgage payment, so you may request an advance payment from your insurance provider.
Will You Be Covered for Evacuations?
This coverage does not kick in for all types of evacuation, but it may cover evacuation on the order of the government. You may not be reimbursed for expenses caused by natural disasters like a hurricane unless the disaster causes direct damage that forces you to evacuate the premises.
What Is Covered by Loss of Use Coverage
The following are a few instances for which you will be compensated by your loss of use coverage
- You can submit receipts for food purchased at the grocery store or when you eat out at restaurants. You will also be reimbursed for food that perished during the disaster.
- Fair Rental Value for a hotel, hostel, inn, or any rental property that offers similar amenities to your home.
- The extra money spent on vehicle fuel due to errands or commutes involving a longer distance than usual.
- Parking and transportation fees that you wouldn’t have incurred if you weren’t forced to vacate your home.
- Costs of hiring a pet sitter if your temporary living area does not allow pets on the property.
- Moving costs and temporary storage fees to protect your personal belongings while your home is being repaired or rebuilt.
How Much Loss of Use Coverage Do You Need?
The loss of use coverage limit for home insurance is usually between 20% to 30% of your home’s insured value or your dwelling amount. Coverage for renters insurance works a little differently than home insurance. Because renters insurance typically does not include dwelling coverage, you will have to inform your provider about your desired level of coverage.