What happens when disaster strikes, your home is damaged, and you're forced to live elsewhere while repairs are made? What does homeowners insurance cover while you’re displaced?
Homeowners insurance provides something called loss of use coverage, which reimburses you for certain living expenses while you’re displaced from your home due to a covered event. An independent insurance agent can help you understand loss of use coverage, as well as all of the coverage included in your home insurance policy.
What Is Loss of Use Coverage in Home Insurance?
Loss of use coverage helps you with additional living expenses if your home is damaged by a covered peril (e.g., a fire) and you cannot live in your home while repairs are being made. It typically covers expenses like housing, meals, storage, and more, as long as they align with your usual living expenses.
Say a heavy windstorm tears the roof off your house and shatters several windows. Thanks to loss of use coverage, your homeowners insurance policy helps you pay for hotel accommodations and more while your home is being repaired.
How Does Loss of Use Coverage Work?
If your home is severely damaged or destroyed by a peril that's covered by your home insurance policy (e.g., a fire, hail, a windstorm, etc.), you'll likely have to temporarily move out while repairs are being made. The cost of housing and certain other expenses necessary to maintain your lifestyle will be reimbursed while you're displaced.
These types of housing and additional living expenses may be reimbursed under your loss of use coverage, up to the limits of your policy:
- Cost of temporary housing: If you’re staying at a hotel while your home undergoes repairs, loss of use coverage will pay for it. The quality of the hotel must match your normal standard of living to be covered. For example, those who live in luxury estates can often receive reimbursement for more expensive hotels.
- Extra fees associated with temporary housing: If you’re required to get a credit check or pay for utilities in a temporary residence you’re renting, loss of use coverage can take care of the fees.
- Additional living expenses: If you’re unable to cook while displaced from your home, loss of use coverage can help you pay for meals. Additional living expenses could also apply to various other things, such as any extra gas required due to an increased commute time from your temporary residence.
- Lost rental income: If you normally rent out a part of your house and your tenant is temporarily displaced due to a covered peril, loss of use coverage will reimburse you for what they’d normally pay. However, loss of use coverage will not provide anything for the renter; they’d need their own renters insurance policy for that.
- Prohibited use: If the government should deny you access to your undamaged home due to a disaster that has damaged other homes in the neighborhood, loss of use coverage would apply. However, you’re not covered if the city orders you to evacuate due to harsh storms or other disasters that have not resulted in damage already.
Loss of use coverage is typically 20% of your policy’s dwelling coverage limit, depending on your insurer.
Having your home suffer severe damage and require extensive repairs is stressful enough, but being displaced from it can be even more stressful. Luckily, loss of use coverage for homeowners insurance can offer at least some reassurance by covering your temporary housing and living expenses while the damage is being cleaned up.
Why Would I Need Loss of Use Coverage?
While everyone hopes they won't need their loss of use coverage, it can be a huge help in the following situations:
- You’re temporarily displaced from your home due to a fire, windstorm, or other covered peril under your homeowners insurance and must find another residence while repairs take place.
- You’re barred from accessing your home by the government due to a local disaster and must find a temporary residence until you’re allowed to return.
- You’re temporarily displaced from your home due to a covered peril or government order, and need to recover income you’d normally receive from a renter.
No one wants to think about losing their home, even for a little while. Still, it’s wise to keep in mind the scenarios in which loss of use coverage would come in handy and help lighten the burden.
How Long Does Loss of Use Coverage Last?
Loss of use coverage can last a significant period of time, but understandably, there's a limit on how long you can claim the need for reimbursement of your living expenses.
Loss of use coverage in homeowners insurance typically lasts as long as it takes to repair or rebuild your home or until your policy limits are exhausted, whichever comes first. If you decide to permanently relocate to a new home rather than rebuild your damaged home, loss of use coverage typically applies until you've moved to a new permanent location.
How an Independent Insurance Agent Can Help You Find the Best Homeowners Insurance
In order to get the protection you need (and deserve), you’ll want to work with a trusted expert. Independent insurance agents will not only know where to find the best coverage and price, but will also help to make sense of the fine print.
Consider your unique needs, then connect with an independent insurance agent to help you take the next steps. When you need to file any kind of claim, your agent will be there to help you through the process.
