Does Renters Insurance Cover Temporary Housing?

Nobody hopes accidents will happen to them, but they do. And if that accident happens to the home you’re renting, the damage could be compounding. Your home could be destroyed by an accidental fire, a devastating natural disaster or something else.

If that happens, would you know where to turn? If you have renters insurance, you could lean on your policy to provide you financial assistance — to replace your belongings and cover additional living expenses while your home is being repaired or rebuilt. Let’s take a look at everything you need to know about renters insurance and temporary housing.

Yes, the loss of use coverage in your renters insurance policy covers temporary housing if the rental home you’re living in was damaged or destroyed by a covered peril and you must move out while it’s being repaired or rebuilt. Renters insurance also covers extra living expenses you incur, such as extra gas for longer commutes and storage units to house belongings you can’t bring with you.

If your home is deemed uninhabitable and you must temporarily move out, your policy’s loss of use coverage would pay for a hotel of equivalent value up to your monthly rent. If you pay $1,200 per month in rent, your loss of use coverage would reimburse you up to that amount, but it likely wouldn’t cover much more.

Depending on the timeline of repairs to your home, and since hotels can get expensive quickly, it’s probably best to stay in a hotel for a week or two while you find a rental house or apartment that’s more in line with your monthly rent.

The second form of temporary housing is to find a short-term rental. By utilizing short-term rental websites, you can likely get closer to the ballpark of the $1,200 per month you pay in rent. If it’s going to take a while to repair your home, this is likely the best and most cost-effective method.

In some instances, your insurer may also reimburse you for a little more than what you pay in monthly rent if that’s the only thing available. It’s best to consult your insurance agent before signing a short-term lease or paying for a place.

Filing a claim is the first step in the road back to normality so, if your home sustains damage, you’ll first need to file a renters insurance claim. After filing a claim, an insurance adjuster who works on behalf of your insurance company will visit your home to survey the damage.

Adjusters are the people who deem the home uninhabitable or not. Even though you may feel like your home is uninhabitable because things are out of place or a few windows are broken, it’s ultimately up to your adjuster to determine.

If your home sustains hurricane damage to the windows, your adjuster could direct you to board up the windows until they’re repaired so you can continue living in the home. However, if a fire rips through your kitchen or entire home, your adjuster will likely deem the home uninhabitable. Let’s take a look at some of the most commonly filed claims for covered perils:

Renters insurance will only reimburse you for temporary housing and additional living expenses if you have loss of use coverage in your policy. Unlike other home insurance policies, loss of use coverage is optional in renters insurance. You can either opt to include or exclude it in your policy, and you’re the one who chooses how much coverage you receive.

Loss of use coverage is designed to reimburse you for living expenses you incur when your home is damaged or destroyed and you must temporarily move out. For renters, the major expense is a new place to live while your home is being repaired or rebuilt.

When your home is deemed uninhabitable, your home insurance claim is filed under your policy’s loss of use coverage. Instead of cutting you a check upfront for your additional living expenses, your insurer will reimburse you for your expenses, so it’s imperative that you keep all the receipts, including the bills for temporary housing.

If you don’t have enough money to pay upfront, you may be able to have your insurer cover some of the costs upfront.

Your policy’s loss of use coverage typically ranges from $1,000 all the way up to $100,000. However, you likely won’t need that much. If you have $5,000 in loss of use coverage, that means each claim will reimburse you for up to $5,000 for additional living expenses. If your rent is $1,200 per month and you’re out of your home for three months, you’d likely be covered for many of the expenses.

For renters, it’s smart to match your loss of use coverage with at least three months’ worth of your rent. So if your rent is $1,200 per month, you should get at least $4,000 in coverage. You may be contractually obligated to continue paying rent on the home you can’t live in, so you may be paying $2,400 per month in that instance. Loss of use coverage steps in and will pay up to your monthly rent for an equivalent place to live.

Matching your coverage can pay $3,600 in rent and still have $400 leftover to pay for any additional expenses like a storage unit. However, loss of use coverage will only pay up to your monthly rent. So if you pay $1,200 per month, but your temporary place costs $1,500 per month, you’d likely be stuck paying the $300 difference.