What is Loss of Use Coverage For Home Insurance?

January 18, 2021

If your home burnt to the ground or the storm damage was severe enough that your home wasn’t livable, where would you go? Would you have the money to cover the costs to live elsewhere while still covering the cost of your mortgage?

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If you said ‘no,’ don’t worry, you aren’t alone. Many people cannot cover the cost of living elsewhere which is why they opt for loss of use coverage on their home insurance.

What is Loss of Use?

Loss of use coverage helps you pay the costs to live elsewhere while your home is unusable. Many home insurance policies come with this coverage built it, but you may also have the option to increase the coverage if you wish.

Loss of use coverage typically covers some or all of the following expenses that result from you being displaced from your home due to disaster:

  • The cost of a hotel or rental
  • Cost to store your personal belongings
  • Costs to move your belongings
  • Transportation or parking expenses
  • Pet boarding expenses
  • Excessive food bills or laundry bills

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The Limits on Loss of Use

Each home insurance policy has different limits on its loss of use policy. Ask your insurance agent how much loss of use is automatically included. Also, ask about the limits to increase your coverage. Typically, you can expect an insurance company to limit loss of use coverage to 10% to 20% of your dwelling coverage.

The limits don’t automatically mean the insurance company will pay you that amount in the face of disaster, though. Typically, you make a loss of use claim after you pay a bill, such as a hotel or grocery bill. The insurance company then determines the validity of the claim and reimburses you for the costs. That doesn’t mean on a $20,000 policy that you’ll receive $20,000. Instead, you’ll receive reimbursement of the actual costs you incur based upon the insurance company’s approval.

Using Loss of Use Coverage

It’s important to understand that you can only use your loss of use coverage when you experience damages that the insurance company covers. For example, if you have flood damages but don’t have flood insurance, you won’t be able to use your loss of use coverage. Your home must experience a peril that your insurance covers, such as storm damage or a fire.

You should check with your insurance provider to determine if your loss of use coverage has a deductible. In most cases, the insurance company waives the deductible for loss of use, but each policy is different. Check with your insurance company and/or read your policy’s fine print to find out for sure.

Also, keep in mind when you use your loss of use coverage, your insurance company will likely closely evaluate the costs you try to claim. They will make sure the cost was ‘necessary’ and not excessive. It’s important to get in touch with your insurance company right away and discuss your loss of use benefits so that you know what they will and will not cover before you incur expenses.

Loss of use coverage can help make a disaster more affordable. While it’s not pleasant to be unable to live in your home, knowing that you have help with the financial portion of the issue can be reassuring. Talk with your insurance agent about your loss of use coverage and determine if it’s adequate for what you would need should you be displaced from your home due to disaster.

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