Home insurance offers several different coverages to protect homeowners from several different hazards and risks. One such coverage is loss of use coverage, which offers financial assistance to help homeowners cover their additional living expenses if their home becomes temporarily uninhabitable due to a covered peril.
If a fire, storm, or another covered event destroys your home and forces you to temporarily live elsewhere, loss of use coverage can help you cover your additional expenses so that you can maintain financial stability and peace of mind while your home is being repaired.
To help you better understand what protections your home insurance policy offers, here’s what you need to know about loss of use coverage.
What is Loss of Use Coverage?
Loss of use coverage, also known as additional living expenses (ALE) insurance or Coverage D, reimburses homeowners for basic living expenses if their home is destroyed by a covered peril, like a house fire or a hurricane.
In these circumstances, you may be forced to temporarily vacate your home and live in a hotel or a temporary apartment. ALE insurance helps you maintain your standard of living and protect your financial health in case your home becomes uninhabitable.
What does it cover?
After a disaster, you may be forced to leave your home and live elsewhere for some time. When this happens, loss of use coverage can help you pay for various living expenses, including:
● Hotel or rental home expenses
● Car rentals
● Public transportation
● Temporary storage fees
● Pet care
These are among the expenses insurance companies will typically reimburse you for if you are forced to leave your home for an extended period of time. Depending on your insurance policy, you may be able to get reimbursement for other living expenses as well. Make sure to contact your insurer to discuss the extent of your loss of use coverage.
Keep in mind ALE coverage typically has specific limitations on what expenses are covered. It typically only covers expenses that are considered necessary, and even then, there are usually specific dollar limits that you should be careful not to exceed.
Often, if you are forced to leave your home, you can contact your insurance representative and they will provide assistance with finding appropriate accommodations.
What’s not covered?
Loss of use coverage does not reimburse you for expenses that you were responsible for before your home became uninhabitable.
For example, ALE insurance will not help you pay for your mortgage, vehicle insurance, health insurance, and similar expenses. It only covers additional living expenses that you become responsible for due to your house being destroyed.
For example, say your normal grocery expenses are $500 per month. Your home is destroyed by a house fire, and you are forced to temporarily stay in a hotel while your home is being rebuilt. Since your hotel room doesn’t have a kitchen, you have to eat out more often, and your food costs increase to $800 per month. In this case, loss of use coverage will reimburse you for the additional $300 you spent on food while living away from home, not the entire $800.
Loss of use coverage also does not cover additional living expenses if your home is destroyed by a disaster that is not covered by your home insurance policy. For example, if your home is destroyed by a flood or an earthquake, loss of use coverage typically will not pay for your additional living expenses as these disasters are not covered perils in most home insurance policies.
How Much Loss of Use Coverage Do You Need?
In most home insurance policies, loss of use coverage ranges from 20% to 30% of your dwelling coverage. Dwelling coverage is the portion of your home insurance policy that protects your home’s structure from damages caused by covered perils.
So if your home is insured for $250,000, your ALE coverage will typically range from $50,000 to $75,000. If your additional living expenses exceed this amount, you will likely have to cover them yourself.
Consider how much money you would need to support yourself and your family while living away from home for an extended period of time and adjust your loss of use coverage accordingly.
Request a Home Insurance Quote
Home insurance provides financial protection for homeowners and protects them against a wide range of common risks and natural disasters.
Loss of use coverage, in particular, provides essential financial assistance for homeowners that are forced to temporarily live elsewhere after their home is destroyed by a fire, storm, burst pipe, or another covered peril.
Contact FIB Insurance today to get a custom quote and learn more about home insurance and loss of use coverage in Miami, FL.