Insurance Claim Loss of Use Coverage and Additional Living Expenses For Homeowners
If a fire destroys your home, you can claim hotel accommodations, car rentals, meals out, and other expenses that are a result of a covered claim. These expenses are claimed through home insurance under loss of use coverage and additional living expenses.
Loss of use coverage and additional living expenses can make up a significant portion of an insurance claim. However, many policyholders don’t understand how these coverages work.
Keep reading to discover what you need to know, along with answers to the most common questions, about loss of use coverage and additional living expenses on an insurance claim.
What is Loss of Use Coverage?
If your home or property is unlivable due to an incident, then you have “lost” the “use” of that property. You may have to live at a hotel for the days, weeks, or months it takes for your property to be repaired. We’re already seeing a lot of these situations with the recent tornado damage claims in Nashville Tennessee from the March 3 tornadoes that hit the area, causing at least one billion dollars in property damage. If you are unsure of your coverage for Loss of Use or Extended Living Expenses, or have other questions regarding a property damage claim from the recent Nashville Tornado, speak with a Nashville Public Adjuster for assistance.
Most home insurance policies have some type of loss of use coverage. This coverage will compensate you for certain additional living expenses incurred while your property is unable to be used – like hotels and meals.
If you’re a landlord, then loss of use coverage can also cover any lost rental income, which is income you would have earned if your rental property was livable.
Loss of use coverage is also known as additional expenses insurance or part D coverage. It covers any living expenses that you incur if your home is declared uninhabitable as a result of a covered peril.
If your home burns down in a fire, for example, then you and your family can no longer live in your home while dealing with a fire damage claim. You may have to live at a hotel for a few months. You may need to dine out. In this situation, you should be able to make a claim through your home insurance policy’s loss of use coverage.
What Types of Expenses Are Covered By Loss of Use Coverage?
Loss of use coverage can vary between insurance plans. Generally, however, your home insurance company will reimburse you for any money spent to help you maintain your current standard of living while your property is being repaired, rebuilt, or replaced.
Some of the most common expenses claimed through loss of use coverage include:
- Temporary accommodations like a hotel, motel, or apartment
- Moving costs
- Grocery and restaurant bills
- Laundry costs
- Transportation expenses
- Parking fees
- Pet boarding
Thanks to loss of use coverage, you can continue your normal standard of living after a covered peril like a house fire. You don’t have to live in a homeless shelter, for example, because your house burned down. You had home insurance, and home insurance will give you a safety net until your property is livable again.
How Much Loss of Use Coverage Do I Have? Is There a Limit?
Your home may be unlivable for weeks or months. Will your home insurance continue paying your bills forever? Or is there a limit to your loss of use coverage?
Typically, loss of use coverage adds up to 20% to 30% of your home’s insured value. If your home is insured for $500,000, for example, then you might be able to claim a maximum of $100,000 to $150,000 under your loss of use coverage.
What happens if you exceed your loss of use coverage? In this situation, you may need to pay for expenses out of pocket.
Certain higher-end insurance companies like Chubb and AIG offer unlimited loss of use coverage to policyholders. Under unlimited loss of use coverage policies, there’s no limit to how much reimbursement homeowners can receive.
Generally, however, the average home insurance policy from a standard insurer will provide loss of use coverage up to 20% to 30% of your home’s insured value.
When Can I Request Loss of Use Coverage?
Loss of use coverage doesn’t apply to all home insurance claims. It only applies to claims where your house is declared unlivable.
Additionally, loss of use coverage only applies to covered perils – which are incidents covered by home insurance. Your home insurance policy will always cover fires, for example, but will never cover floods.
If a water pipe breaks in your basement but the rest of your house is unaffected, then you will not be able to make a claim under loss of use coverage.
Similarly, if your home is infested by cockroaches and you need to leave your house for an exterminator, your home insurance will not typically pick up the tab because pests aren’t usually covered by a home insurance policy.
Read your home insurance policy to make sure you understand what types of incidents are covered by home insurance and which are not.
Do I Have to Pay a Deductible for Loss of Use Coverage?
Generally, an insurance company will waive a deductible for covered loss of use claims, which means you will not have to pay the deductible.
However, you will still have to pay a deductible for the dwelling or personal property components of your claim.
What’s the Difference Between Loss of Use and Additional Living Expenses?
Loss of use and additional living expenses are often used interchangeably. Technically, however, they’re two different things.
Loss of use coverage compensates you in multiple ways after a covered peril. Loss of use coverage covers additional living expenses, for example, along with fair rental value.
Additional living expenses, meanwhile, are just one part of your loss of use coverage. Additional living expenses (ALE) are things like hotel accommodations, meals out, and pet boarding costs. These are expenses that you would not normally have to pay if your home was livable.
What Can I Claim Under Loss of Use Coverage?
Loss of use coverage protects you in multiple ways. It covers any increases in living expenses you incur while your home is being repaired or restored (additional living expenses). It also covers lost rental income, which is any rental income you would have earned if your property was livable.
Here’s how each component of loss of use coverage works.
Additional Living Expenses
If you are forced to move out of your home for days, weeks, or months, then your ordinary expenses will be higher. You won’t have access to your own kitchen, which means you’ll have to dine out. You may not have any furniture, which means you have to pay for hotels or furnished rental properties.
Example: Let’s say your family normally spends $500 per month on groceries and $1,500 on a mortgage. A fire destroys your home, and you need to spend two months at a hotel. The hotel costs $100 per night (roughly $3,000 per month). Since you don’t have a kitchen, you’re forced to dine out more frequently, which means your food expenses triple. Instead of spending $2,000 per month to maintain a normal standard of living, you’re now spending $5,000 per month. That’s how additional living expenses work.
However, additional living expenses coverage doesn’t let you go wild. You can’t eat steak and lobster for dinner five nights a week. Instead, your insurer will give you a certain daily limit based on the cost of living in your area – like a per diem. You will need to provide receipts for everything.
The specific expenses you can claim will vary between insurance companies. Some of the most common expenses to claim, however, include:
- Hotel accommodations
- Rent for a temporary, short-term, furnished apartment or condo
- Additional fuel or mileage expenses beyond your normal amount
- Additional food expenses (meals out, fast food, or extra groceries)
- Car rental costs
- Public transportation costs
- Clothing expenses (if you lost clothes during the covered peril)
- Storage unit bills
- Parking expenses
- Pet boarding costs
Ultimately, you should be able to claim any expenses you need to maintain your ordinary standard of living that you would not normally have paid if your property was livable.
Fair Rental Value
Additional living expenses are just one component of loss of use coverage. Fair rental value is another important component.
Fair rental value compensates landlords who are unable to collect rent because of a covered peril. In this situation, most insurers will reimburse you for lost rental income for up to 12 months after the covered loss occurred.
If you normally earn $1,000 per month in rent for your property, for example, but a fire destroyed it and it takes 6 months to repair it, then you should be reimbursed $6,000 through your fair rental value coverage.
Prohibited Use
There’s a third component of loss of use coverage called prohibited use. This component covers both your additional living expenses and fair rental value reimbursements in situations where you are unable to access your home.
Let’s say a forest fire struck your neighborhood. Half of your neighborhood burned down, but your half of the neighborhood is intact. Local authorities, however, have declared your neighborhood a mandatory evacuation zone, and you cannot return to your home. In this situation, you can make a claim through prohibited use coverage.
You may also be able to make a claim under prohibited use coverage if the area is generally unsafe. Maybe your home is accessible but there are downed utility poles posing a hazard to your family. Maybe there’s hazardous material or sewage surrounding your home.
Depending on your situation, you may be able to make a prohibited use claim through your loss of use coverage.
How to Get Reimbursed for Additional Living Expenses
The most important thing to remember when filing a loss of use claim is to hold onto all of your receipts.
If you are forced to leave your home after a fire, then you need to start holding all your receipts immediately. Hold all receipts for reasonable life expenses, including any costs incurred for lodging, food, transportation, etc.
Many insurance companies will provide you with emergency funds immediately after a covered peril. Your insurer may wire $2,000 to your bank account the night your house burns down, for example, to cover immediate expenses like hotels and meals out.
To submit a loss of use insurance claim, you will typically need to use one of the following three options:
- Contact your home insurance agent directly to start the claim
- Make a claim through your carrier’s website or app
- Call your insurer’s claims department
First, your insurer will ask you to complete a form explaining your normal living expenses, which is the money you pay for gas, food, rent, and other expenses each month.
Next, you’ll be asked to submit any receipts for additional living expenses incurred after a covered peril.
Finally, your insurer will cover the difference between the two amounts. If you normally spend $1,500 on your mortgage but you spent $3,000 on hotel bills this month, for example, then your insurance should reimburse you for $1,500. It’s the additional amount you spent this month because your house was unlivable (although in this situation you may still have a mortgage payment to make, which can raise your claim further).
If you’re making a lost rental income claim, then you need to provide different information. You’ll need to provide a lease agreement and tax form, for example, proving the rental property was a source of income.
If you have a condo in Florida that you use for two months every Christmas and leave empty the rest of the year, for example, then you cannot claim lost rental income on this condo because you were not earning rental income from that property.
Expect Monthly Payments from your Insurer
After making a claim for loss of use coverage, your insurer may send you monthly payments. These monthly payments help you cover your ongoing bills.
Your insurance company will eventually come up with a final settlement amount, and any money they have already sent to you will be deducted from this amount.
Renters Insurance and Loss of Use Coverage
Renters insurance protects you and your personal property. Just like home insurance, renters insurance will typically pay for your living expenses if your rental unit becomes unlivable after a covered peril.
If you are renting an apartment, for example, and your apartment burns down, then you may have to live in a hotel for a month. You should be able to make a loss of use coverage claim through your renters insurance policy.
Renters insurance policies typically have shorter limits on loss of use coverage than home insurance policies. Renters are expected to find a new place to live shortly after a loss.
Check with your insurer for specific coverage options on your renters’ insurance policy. Common loss of use expenses covered by renters insurance include:
- Hotel or motel accommodations
- Food, groceries, and restaurant bills
- Fuel expenses
- Credit check fees for finding a new rental property
Consider Hiring a Public Adjuster to Maximize your Loss of Use Claim Settlement
Loss of use insurance claims can be tricky. Insurance companies may push back against every expense.
If your home is unlivable for days, weeks, or months, then your loss of use insurance claim could be worth thousands of dollars. If your home has been partially or fully destroyed, then your home insurance claim could be worth 5, 6, or 7 figures in total.
When you’re dealing with a large insurance claim, it may be in your best interest to hire a public adjuster.
A public adjuster is a trained, experienced, and licensed insurance industry professional. The public adjuster works on your behalf, negotiating with the insurance company to secure the highest possible settlement on your home insurance claim.
A good public adjuster can double or even triple a home insurance settlement.
Most public adjusters work on a contingency basis, which means they don’t charge any fees until the policyholder accepts the final settlement offer from the insurance company. At this point, the public adjuster charges a pre-arranged fee (typically 8% to 15% of the final settlement).
Contact ClaimsMate today for a free consultation. Our licensed public adjusters have dealt with hundreds of loss of use insurance claims in the past. We know how to maximize your home insurance settlement.
Final Word Loss Of Use Coverage For Property Damage Claims
Loss of use coverage is an important component of home insurance. A typical home insurance policy includes loss of use coverage with a limit of 20% to 30% of your home’s insured value.
This loss of use coverage includes things like additional living expenses, which are any extra expenses incurred by you and your family if your home is unlivable after a covered peril.
This loss of use coverage can also include lost rental income, which is any money you would have earned from rental income if your property was livable.
If your home or property was damaged in a covered peril (like a fire), then you should be able to make a claim under your home insurance policy’s loss of use coverage.
Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.
