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What Is Loss of Use Coverage in Home Insurance?

By Jarrod Heil

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Loss of use coverage, also known as Coverage D of a home insurance policy, is designed as a saving grace to curb your expenses if your home is damaged or destroyed by a covered peril and you’re forced to temporarily move out while it’s being repaired or rebuilt.

If you are forced to temporarily and unexpectedly move from your home, life can get overwhelming. You’ll be searching for an extended stay hotel or short-term home of fair rental value to call your own while repairs are being made. You’ll be transferring what’s left of your belongings from your uninhabitable home to the temporary one and replacing perished food.

Chances are you’ll be coordinating all the repairs to your home, which can get extremely hectic, especially when you’re already dealing with the added stress of a disaster.

Luckily for you, loss of use insurance coverage within your homeowners or renters insurance policy helps make unbearable events a little more bearable.

What would happen if an unforeseen event forced you and your family out of your home? Would you be prepared? From burst pipes to house fires and hurricanes, accidents and disasters happen every day. With loss of use coverage, everything will be a bit more bearable.

What Is Loss of Use Coverage?

Loss of use coverage, within a homeowner and renters insurance policy, reimburses the policyholder for additional living expenses (like a home or hotel of equivalent value, storage, food, gas and other expenses) if their home is damaged or destroyed by a covered peril and needs to be repaired or rebuilt.

Loss of use covers mainly applies to two categories: additional living expenses and fair rental value. Additional living expenses are basic expenses that you wouldn’t have otherwise needed to pay if you were still living in your home. Fair rental value is the reimbursement of monthly rent or hotel fees while your home is being repaired or rebuilt.

Also known as Coverage D, it helps you maintain your current standard of living by providing reimbursements for a fair rental value that’s comparative to the size of home or apartment you resided in before the disaster. It also covers basic living necessities like food and gas and any other expenses you wouldn’t have normally incurred if you were still living in your home.

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How Does Loss of Use Insurance Work?

Loss of use coverage works by reimbursing you for any unexpected expenses if you’re forced to temporarily move out of your home due to a covered peril.

Once you file a loss of use claim, you’ll keep all your receipts for things like a hotel or rental home of equivalent value, grocery or restaurant bills, gas charges and storage fees. You’ll submit the receipts with your claim and your insurance company will reimburse you for any expenses they deem to be necessary.

It’s important to note that homeowners, who are still paying mortgage payments on their property that’s damaged or destroyed and deemed uninhabitable, will still be expected to produce monthly mortgage payments while their home is uninhabitable, so you may request an advance payment from your insurance company.

Loss of Use Home Insurance Covers the Following:

  • Fair Rental Value for a hotel or rental property that’s an equivalent size and cost as the one you were forced to leave.
  • Food at the grocery store or restaurants, as well as any food that perished during the disaster.
  • Gas due to your commutes and errands being a longer distance than usual.
  • Parking and transportation fees that you wouldn’t have compiled had you been in your home.
  • Pet boarding due to a hotel or home not accepting them or someone having to care for them.
  • Moving costs and temporary storage fees to protect your personal belongings while your home is being repaired or rebuilt.

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How Much Loss of Use Coverage Do I Need?

Homeowners insurance loss of use coverage is typically up to 20% of your dwelling limit, but it can be increased or reduced based on your unique needs. If the dwelling portion (the coverage for the structure of your home) of your policy is set for $150,000, your loss of use insurance coverage will max out at $30,000 per claim ($150,000 x 0.20 = $30,000).

Loss of use renters insurance coverage works a little differently than its counterpart. Since renters insurance doesn’t have dwelling coverage, you must select the dollar amount you’d like to have for your loss of use coverage. This amount can be from $1,000 and extend to more than $200,000 per claim. Keep in mind, the more coverage D you have, the more expensive your monthly premium will be.

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Can I Use My Loss of Use If I Have to Be Evacuated?

It depends on the type of evacuation. You may be able to implement loss of use coverage if you must evacuate your premises because civil authority prohibits the use of your residence. Unfortunately, you cannot use your coverage D if you must evacuate your premises due to an event such as a hurricane, unless the hurricane causes direct damage that makes your home uninhabitable.

You’ll want to consult your agent before filing a claim. To learn more about the different types of coverage within your policy, check out the following articles:

The editorial content on Clovered’s website is meant to be informational material and should not be considered legal advice.