Loss of Use Coverage D: What is covered?
Loss of Use Coverage (Coverage D) is a part of your homeowners’ insurance policy that covers added living expenditures that may occur when your home is temporarily uninhabitable.
Imagine the following:
Your home is being repaired or rebuilt because of a heavy thunderstorm or an emergency like a fire.
Of course, this is a scenario no one of us would like to encounter, but accidents and unfortunate events sometimes take place, and we cannot stop them.
What we can do, though, is protect ourselves by planning ahead.
If you have a home insurance policy, it will cover the costs you need to repair your home. But it is uninhabitable for a certain period. So, where to stay? Can your budget account for the temporary accommodation, food, and transportation?
If you have loss of use coverage included in your homeowners insurance policy, it will reimburse all of these additional living expenses.
What Does Loss of Use Coverage Mean?
Loss of use coverage (also known as ‘Coverage D,” “loss of use insurance,” and “living expenses coverage”) is part of your homeowners insurance policy that covers additional living expenses that may arise in the event that your home is temporarily uninhabitable.
However, bear in mind that the reason why your house is unsuitable for living during that period has to be due to a covered peril in your renters or homeowners insurance.
A “peril” is anything that could cause damage to your home. The most common risks or perils included in insurance policies are fire, wind, snow, hail, lightning, vandalism, and theft, though this is negotiable, depending on the type of insurance that you select.
Similarly, condo insurance loss of use coverage would be useful if you have to move out of your condo unit, and renters insurance covers loss of use if you are a renter.
Another term that should be mentioned here is Fair Rental Value that some companies may provide. Namely, a Fair Rental Value coverage kicks in case that you rent an insured place to a tenant. While the house is uninhabitable, you will be able to claim Fair Rental Value coverage for rental income you will be missing during the period.
Depending on the duration you will have to wait for your home to be rebuilt or repaired, you could face many unprecedented costs, and the total sum could drive up really high.
That’s why you ought to make sure that your use coverage limit is high enough to cover expenses and help you maintain your standard of living.
With the help of your agent and insurance company, you’ll determine the amount of your loss of use coverage. It is usually 30% of your dwelling coverage limit.
Our carriers allow you to specify your normal living expenses per month by completing their worksheet, which is then used to establish the baseline of your loss of use coverage and process a claim.
A pro tip: To prove that the data is truthful, insurance companies will ask you to provide a copy of the receipts, so always keep them.
Which Living Expenses Are Covered By Loss of Use Insurance?
Before we continue, let’s go over the most frequent expenses loss of use coverage would compensate for if you had to leave your place.
Temporary Housing is the most frequent claim under the use coverage loss insurance. No matter whether your temporary residence of choice is a hotel, an apartment, or a motel, your loss of use coverage will reimburse for the stay.
The cost of moving also applies here. You may need to reimburse storage costs for your household items or need transportation if you bring them along, in which case you can claim transportation and parking fees.
Also, any excessive bills due to a covered loss can be covered by your policy (laundry, grocery and restaurant bills, utilities, additional car mileage, pet boarding, etc.). To put one of these in context – if you have to stay in an apartment, it’s more likely that you will have to dine out more frequently than you would usually. Your policy will cover the difference in the expenses.
What Else Does Your Home Insurance Cover?
Besides loss of use coverage, your renters or homeowners insurance policy usually has the following types of coverages:
- Dwelling coverage (Coverage A). In insurance terms, dwelling coverage refers to the actual residing property and the physical structure of your home. This is also the largest portion of your insurance and pays for the rebuild and repair expenses for your home.
- Separate structures (Coverage B). All the structures that are physically detached from your home, such as a shed, garage, fence, etc., are covered by Coverage B.
- Personal property coverage (Coverage C). Your personal belongings that get damaged as a result of a covered risk are insured by this type of coverage.
- Personal liability (Coverage E). These claims include legal fees if you have injured someone or caused damage to them. For example, you can use it to cover defense in court.
- Medical payments (Coverage F). Your home or renters insurance can also cover the cost of medical bills in the event that an individual is injured on your insured property.
Water Damage is not Standard Coverage – Read This
Flood insurance is not a part of your standard home or renters insurance policy. However, your insurance company may offer you to add an endorsement that will protect you from damage caused by water.