What Is Loss Of Use
Loss of use is a safety net built into your homeowners insurance policy. It kicks in when a covered disaster ruins your house and forces you to move out. If a fire or a fallen tree makes your home unsafe, this coverage steps up. It pays for your living expenses while contractors rebuild your property.
Insurance companies introduced this coverage in the mid 20th century. They realized that paying to rebuild the house was not enough. Homeowners still suffered a massive financial hit just by losing the use of their property during long repair times. Today, this protection is a standard part of most Home Insurance policies.
How It Pays You
Loss of use coverage is often called additional living expenses or ALE. The key word is additional. The insurance company does not pay all your bills. They only pay the extra costs that pop up because you are not living at home.
Think about your grocery bill. If you normally spend $500 a month on food, you still have to pay that $500. But since you are living in a hotel without a kitchen, you have to eat out. If your food bill jumps to $1,200 a month, your policy covers the $700 difference. You must keep all your receipts to prove these extra costs.
What It Covers
This coverage handles many different bills that pile up after a disaster. It is designed to keep your family living at your normal standard of living.
- Housing: The cost of a hotel room, a motel, or a short term rental house.
- Food: Restaurant meals and takeout food since you cannot cook.
- Laundry: Fluff and fold services or laundromat fees if you do not have a washer and dryer.
- Pet care: Boarding fees if your temporary rental does not allow dogs or cats.
- Moving costs: The price to move your surviving furniture into a storage unit.
- Transportation: Extra gas money if your temporary home is much further away from your job or your kids' schools.
Limits To Watch Out For
Loss of use does not last forever. Your policy puts strict limits on how much money you get and how long you can use it. You need to know these limits before you face any major Home Emergencies.
Most policies cap this coverage at a percentage of your total dwelling coverage. This limit usually falls in the range of 20 to 30 percent. For example, if your house is insured for $300,000, you might have $60,000 to $90,000 available for living expenses. Keep in mind that costs vary widely depending on where you live and your specific policy details.
There is also a time limit. Many insurance companies stop paying after 12 to 24 months, even if your house is not finished yet. If contractors run into delays, you could run out of coverage. Always ask your insurance agent exactly how long your benefits last so you can budget your temporary rent accordingly.
When It Does Not Apply
Loss of use only works if a covered peril causes the damage. A peril is just an insurance word for a disaster. If a kitchen fire destroys your home, your policy covers the fire, so your loss of use kicks in. If a windstorm rips off your roof, you are covered.
However, if a flood destroys your house, standard home insurance will not help. Flood damage requires a separate flood policy. The same rule applies to earthquakes. If an earthquake ruins your foundation, you only get loss of use coverage if you bought a specific earthquake policy. Always review your paperwork to see exactly which disasters trigger your benefits.
It also does not apply if you simply choose to move out during a planned remodel. If you hire a crew to update your kitchen and you hate the dust, you cannot claim loss of use to stay at a hotel. The damage must be accidental and sudden.
