When looking at home insurance quotes, it’s a good idea to pay attention to the loss of use coverage. While this type of coverage is often ignored by policyholders, it can provide extremely important financial protection after a serious homeowners insurance claim, and it’s usually a relatively inexpensive part of a policy.
What is Loss of Use Coverage?
Loss of use coverage provides for costs that a homeowner may take on if they can no longer inhabit their home because of damaged caused by a named peril. This coverage is not part of a standard home insurance policy. Instead it’s offered as an additional coverage option, or endorsement, that will raise the cost of your home insurance premium. Many insurance companies offer two types of loss of use coverage: additional living expenses and fair rental value. An additional living expenses policy covers the cost of a hotel room or temporary apartment while your home is being rebuilt. This type of coverage also helps pay for other reasonable living expenses, including restaurant bills.
It’s important to keep in mind that an insurance company is more likely to pay for a stay in a simple motel or a reasonably priced meal than a four-star hotel or feast at a steak house. Before you rent a room anywhere after making a major claim, contact your insurance agent and discuss the matter. This will help you avoid any costly mistakes that could compromise the effectiveness of your loss of use coverage, and it will allow you to stay sheltered with peace of mind while your home is repaired or rebuilt.
The second option, fair rental value, offers reimbursement when part of a dwelling that is being rented out is damaged or destroyed due to a covered peril. In this case, the insurance provider reimburses the homeowner the fair rental value for the damaged part of the dwelling. Additionally, if you’re still paying for a mortgage on your home a loss of use coverage policy will help you make your payments. However, this policy helps cover costs up to the policy limit, which is why it’s important to know how much coverage you have.
What Expenses does a Loss of Use Coverage Policy Cover?
- Temporary housing
- Reasonably priced meals
- Moving costs
- Temporary storage of your property.
- Parking fees
- Laundry and dry cleaning costs
What Are a Loss of Use Coverage Policy’s Limitations?
Loss of use coverage is typically restricted to 20% of your dwelling coverage, and some policies only offer coverage for a certain amount of time. There may also be additional requirements set by your insurance company before they provide loss of use coverage, including installing precautions against windstorm or fire damage, improving roofing, or cutting down trees that are near the home. Before buying loss of use coverage, check to see how it will affect your homeowners insurance premiums. Most insurance companies don’t charge too much for loss of use coverage, as it’s a relatively small cost for insurance companies compared to the other costs that they’ll take on in the event of a major claim.
A good way to decide which coverage to buy is to run through a hypothetical scenario. Imagine that you need to be out of your house for a few months while repairs are completed. Think about where you would need to stay, how close you’d need to be to your work and other factors that might determine your costs. It can also be helpful to get a few home insurance quotes to compare the costs and benefits of loss of use coverage. Take the time to make a careful decision about your loss of use coverage, and talk over the matter thoroughly with your insurance agent before accepting a quote.