An electrical fire breaks out in your attic. And while you caught it before it did much damage, your family has to temporarily vacate your home during the remediation and repair process. Loss of use coverage is designed for this exact scenario. “From temporary housing to day-to-day expenses, loss of use is part of your homeowners or renters insurance, and its role is to help provide a safety net in the event that your home becomes uninhabitable for a period of time,” says Adam Bakonis, Director, Product Management.
Here’s what loss of use insurance covers, when it applies to a specific situation, and how to file a loss of use claim.
What Is Loss of Use Coverage?
Loss of use, also called additional living expenses coverage, helps pay for your housing and living expenses if you can’t stay in your home. It’s usually included as Part D in your homeowners, condo, or renters insurance policies, and it’s intended to help you maintain your normal standard of living while your home is being repaired or rebuilt.
When Does Loss of Use Coverage Apply?
Loss of use coverage usually applies when residents must leave their home due to damage from a covered peril. It could be due to storm damage, fire or lightning, a windstorm, theft, or smoke damage. In the above scenario, if the home is deemed unsafe or unlivable due to the electrical fire, your policy may help cover the increased cost of living elsewhere during the repair period.
When Does Loss of Use Coverage Not Apply?
Loss of use coverage may not apply if the damage to your home is caused by a peril that’s excluded under your policy, such as flooding or earthquakes, unless you have separate coverage. It also doesn’t usually apply if your home remains safe and habitable, even if repairs are needed.
How Long Does Loss of Use Coverage Last?
The duration of additional living expenses coverage will depend on your policy limits, any applicable time restrictions, and how long it reasonably takes to repair or rebuild your home. Some policies may set a maximum time frame, while others may cap coverage based on a percentage of your dwelling limit. Check with your insurer to determine limits.
How to File a Loss of Use Claim
If you need to use loss of use coverage, contact your insurer as soon as possible to report the claim. In addition to documenting your home’s damage, you’ll need to keep detailed records of all necessary expenses and save all receipts related to temporary living costs. This can help streamline the reimbursement process.
Losing the ability to remain in your home for a temporary time period is usually beyond your control, but having a good homeowners policy in place with loss of use coverage doesn’t have to be. Mercury can help you find the right balance of coverage to protect your home and family.
Contact us today for a fast, free quote!
What Does Additional Living Expenses Coverage Pay For?
Additional living expenses coverage doesn’t just cover a hotel for a few nights. It can also pay for normal household living expenses, assuming these costs are reasonable and directly related to the covered loss.
Step 1: Temporary Housing
The goal is to provide a temporary living arrangement that’s comparable to your usual standard of living, within policy limits. It could be a short-term rental or a hotel.
Step 2: Food and Transportation Costs
If you no longer have access to your kitchen, your policy may cover the increased cost of meals, such as dining out or takeout, beyond what you would normally spend. And, if you have a longer commute as a result of that displacement, you also may be eligible for transportation costs.
Step 3: Other Necessary Living Expenses
There are some other reasonable costs you may incur because you can’t remain in your home. It could be storage unit fees for storing furnishings while your home gets rebuilt, a pet boarding service for displaced animals, or laundry services if you don’t have access to a laundry space. Just keep in mind that expenses must be reasonably necessary and should align with your typical standard of living.
Frequently Asked Questions
Does loss of use coverage have a deductible?
Deductibles can vary depending on your home or rental policy, but loss of use coverage is usually tied to the underlying property claim. This means the deductible may apply to the initial covered loss rather than separately to additional living expenses.
Can you choose any temporary accommodation?
Temporary housing costs generally need to be reasonable and aligned with your household’s usual standard of living. Your insurer may not cover luxury upgrades or significantly higher costs unless they’re justified by availability.
Does loss of use coverage apply during a mandatory evacuation?
Coverage during a mandatory evacuation depends on your policy terms and the reason for that evacuation. Some policies may provide limited coverage if the evacuation is tied to a covered peril, while others may have specific conditions or exclusions that apply.
Adam Bakonis is a Senior Product Manager for Mercury Insurance, overseeing homeowners and landlord products for California. Bakonis originally joined Mercury as a casualty adjuster and has worked in multiple roles, including claims examiner, property field adjuster, claims project and analytics manager.
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