Natural disasters can strike without warning, leaving homeowners and renters scrambling for temporary housing and essentials. Fortunately, a provision within homeowners’ and renters’ insurance policies, known as “loss of use” coverage or “additional living expenses” coverage, can provide financial support during these challenging times.
Key Highlights
- Loss of use coverage helps cover temporary living costs when your home is uninhabitable.
- It typically includes housing, food, pet boarding, and storage expenses.
- This provision is commonly included in homeowners, renters, and condo insurance policies.
What is Loss of Use Coverage?
Loss of use coverage is a standard provision found in most homeowners insurance policies. It’s designed to help cover living expenses when your home becomes uninhabitable due to a covered disaster, such as a hurricane, fire, or burst pipe.
According to Karl Susman, president of Susman Insurance Services, “Most homeowners’ policies already include this provision.”
Typically, loss of use coverage equals 20% of your dwelling coverage. For instance, if your home is insured for $100,000, the policy might offer $20,000 for living expenses while your home is repaired or rebuilt.
This coverage can be a lifesaver for families, helping them afford temporary accommodations, meals, and even storage for personal belongings.
How Renters and Condo Owners Benefit
Renters and condo owners aren’t left out. Their insurance policies usually include a similar provision. Instead of covering the building itself, renters insurance focuses on personal property. In this case, loss of use coverage typically offers 20% of personal property coverage to help with living expenses.
While this can alleviate some of the financial strain after a disaster, it’s important to ask your insurer about any restrictions, such as dollar limits or time constraints, to ensure you fully understand the coverage.
Short-Term Relief for Long-Term Recovery
Although loss-of-use coverage can provide much-needed relief, it’s meant to be a temporary solution. Experts emphasize that these funds are typically not enough for an extended period, and costs for housing and living essentials may spike after a disaster due to high demand and limited availability.
Jeremy Porter from First Street Foundation notes, “It’s generally not intended to be a long-term solution,” pointing out that the rebuilding process often takes far longer than anticipated. This means that while insurance helps cover immediate needs, families may still face challenges in the long-term recovery phase.
Combining Insurance with Federal Assistance
In some cases, you can combine loss-of-use coverage with federal aid from agencies like FEMA. For example, you might use FEMA funds for temporary hotel accommodations and then apply your insurance coverage for the remainder of your stay or for other living expenses.
This flexibility can help maximize your resources while you wait for your home to be restored.
Conclusion
Navigating the aftermath of a natural disaster can be overwhelming, but understanding your loss of use coverage can provide financial peace of mind. While the provision offers temporary support, it’s essential to be aware of its limits and how you can best utilize it in conjunction with other assistance programs. Ensure you’re familiar with your policy’s specific terms and ask your insurer about any restrictions, so you’re fully prepared if disaster strikes.