What Is Loss of Use Coverage in Homeowners Insurance?

Loss of use coverage is an important part of your homeowners insurance policy.^[1] It helps pay for temporary living expenses and related costs if your home is damaged or destroyed and you have to live elsewhere while repairs are underway.

Also known as Coverage D, loss of use coverage includes additional living expenses (ALE) coverage. ALE coverage pays for expenses beyond your day-to-day living costs, such as hotel bills or restaurant meals.

What is loss of use coverage?

Loss of use coverage typically pays for hotel stays, restaurant meals, and other necessary expenses you incur while you’re unable to live in your home. In most cases, your insurance company will begin paying once it determines your home uninhabitable.

Standard homeowners insurance policies typically include loss of use coverage. But it’s important to note that your loss of use coverage kicks in only if your insurer deems your home unlivable due to a covered peril.^[2]

For example, if your home sustains significant damage from a burst pipe or a lightning strike, your loss of use coverage will pay your additional living expenses while you’re displaced. Keep in mind that coverage doesn’t apply if you need to leave your home due to perils your policy doesn’t cover, such as flooding or an earthquake.

Loss of use coverage limits vary by insurer. Some companies pay for a set period (such as 12 to 24 months), while others pay up to a specific dollar amount.

Find Home Insurance with Loss of Use Coverage

Compare quotes from the top 120+ insurance companies

Enter your ZIP codeView My Quotes

Excellent

4.7 out of 5 based on 14,778 reviews

Secure. Free. Easy-to-use.

How loss of use coverage works

Your insurer will grant a claim under loss of use coverage only if the damage to your home meets specifically outlined criteria. The criteria of what your insurer’s loss of use coverage does and doesn’t cover will be outlined in your policy.

Your policy will also outline the limits of your loss of use coverage. In most cases, these limits equate to a percentage of your dwelling coverage limit, like 20%, for example. In this case, if your dwelling coverage limit was $300,000, your loss of use coverage limit would be $60,000.

Types of loss of use coverage

Coverage D includes three types of loss of use coverage: additional living expenses, actual loss sustained, and fair rental value coverage.

• Additional living expenses: This type of coverage can pay for several different expenses that you might incur if you can’t live in your home. For example, it might cover hotel costs, restaurant meals, laundry services, and dog boarding.

• Actual loss sustained: Your insurance company isn’t likely to compensate you for every purchase you make while your home is uninhabitable — only for any increased expenses. For example, if you typically spend $500 per month on groceries but now spend $900, your policy may reimburse you for the extra $400, not the full $900.

• Fair rental value coverage: If you have a rental property that’s damaged, this type of coverage will compensate you for the loss of income if your renters have to live elsewhere for a period of time.

What does ALE insurance cover?

Loss of use coverage kicks in only after your insurer deems your home uninhabitable. It typically pays for the following living expenses up to a dollar limit or time period listed in your policy:

• Hotel or rental costs while your home is uninhabitable

• Additional food costs due to higher-priced restaurant meals

• Additional transportation costs resulting from your displacement, such as longer commutes

What does loss of use coverage exclude?

It’s important to know what your insurance policy will and won’t cover when it comes to unexpected repairs, especially because some policies only pay for loss of use coverage under certain conditions.

For instance, even the best homeowners insurance policies typically won’t pay for loss of use if your home is damaged by a tropical storm, flooding, or other perils excluded by your policy.

Loss of use coverage also has limits and exclusions. Some insurers set a specific dollar amount (often 10%–30% of your dwelling coverage limit) or a time limit (typically 12–24 months). Your insurance company also won’t pay for expenses you were already responsible for, like day care and your regular food costs.

Your loss of use coverage typically excludes the following:

• Typical living expenses you’d pay anyway, such as your mortgage, day care, and standard food costs

• Damage caused by excluded perils, such as flooding and earthquakes

• Voluntary relocation, such as choosing to move out of your home even though it’s still habitable

Note that coverage varies by insurer. It’s important to read your policy carefully to understand your loss of use coverage limits and when it applies.

Factors that affect loss of use coverage

Many different factors affect your loss of use insurance coverage, including your policy limits, what caused the damage, how long you’ll be displaced, and how well you document your expenses.

Here are a few key points to know about your loss of use coverage:

• Your home must be uninhabitable due to a covered loss for loss of use coverage to apply.

• Your loss of use policy limit is the maximum amount of money your insurance company will pay when you make a claim.

• Your homeowners policy may limit your loss of use coverage to a certain dollar amount or a specific length of time, often between 12 and 24 months. Every insurance company has different guidelines for loss of use coverage.^[3]

• Loss of use insurance pays only for expenses that exceed your normal costs. For example, if your mortgage is $2,000 per month and a month-long hotel stay costs $5,000, your insurance would pay the $3,000 difference.

• Rental costs in the area might affect your loss of use coverage, depending on how expensive homes are to rent.

How much loss of use coverage do you need?

Follow these steps to determine how much loss of use coverage you actually need:

Calculate your living expenses

Add up your mortgage, utilities, food, and anything else you categorize as living expenses.



Know your policy limits

Homeowners insurance policies typically include loss of use coverage, but the amount of coverage may vary.^[4] Make sure your policy’s coverage amount is sufficient to cover your daily standard of living expenses should you need to use it.



Evaluate your risk factors

If you live in a city with a higher crime rate or in a coastal area with a higher chance of hurricanes, make sure your policy and any additional riders cover you for potential hazards.



Compare quotes

Compare quotes from at least three insurers, paying close attention to policy limits to ensure you’re adequately covered.



Choose a policy that works for you

After researching and comparing policies, choose the best fit for your budget and needs.

Compare Home Insurance Policies Online

See personalized quotes from Insurify partners in minutes

Enter your ZIP codeGet My Quotes

Excellent

4.7 out of 5 based on 14,778 reviews

Secure. Free. Easy-to-use.

How to file a loss of use claim

If you need to file a loss of use claim, follow these steps:

1. Contact your insurer as soon as possible after your home is damaged or destroyed. Keep all records of your calls with the insurance company to stay organized.

2. Document your expenses in detail. Write down out-of-pocket costs you’ve incurred, including hotel room stays, restaurant meals, and dog boarding, and keep all receipts.

3. File a claim with your insurance company online, on the app, over the phone, or in person at your insurance agent’s office.

4. Work with an adjuster as they assess your claim, view the damage, and potentially ask you for more documentation. Your adjuster and your insurance company will inform you of next steps, including when you’ll be compensated.

Loss of use coverage FAQs