Loss of Use Coverage: Who Pays to Live Somewhere Else After a Covered Loss
If a covered loss makes your home unlivable, loss of use coverage pays extra living costs while it's repaired. Here is how additional living expenses are calculated and how fast a limit can run out.
A fire, a burst pipe, or a storm can make a home unlivable for months. Your mortgage or rent payments don't stop, and now you need somewhere else to live. Loss of use coverage, often called Coverage D on homeowners policies, is the part of the policy designed for this.
What it typically pays
Loss of use usually has two parts:
- Additional living expenses (ALE): the increase in living costs while your home is being repaired, so you can keep a comparable standard of living. That can include temporary housing, extra food costs if you can't cook, additional mileage, laundry, and pet boarding.
- Fair rental value: if you rent out part of your home, the lost rental income from the unusable portion.
The key word is additional. ALE generally covers costs above what you normally spend, not your usual bills.
How it's calculated
A hypothetical household's home is damaged by a covered fire. Their policy has $60,000 in loss of use coverage.
Show the numbers behind this chart
| Months displaced | Remaining loss of use coverage |
|---|---|
| 0 | $60,000 |
| 2 | $52,600 |
| 4 | $45,200 |
| 6 | $37,800 |
| 8 | $30,400 |
| 10 | $23,000 |
| 12 | $15,600 |
| 14 | $8,200 |
| 16 | $800 |
Sixteen months sounds like plenty, but after major fires or widespread disasters, rebuilding can take longer, and temporary housing costs can rise sharply when many households are displaced at once.
How limits are set
On many homeowners forms, the loss of use limit is set as a percentage of the dwelling limit, and some policies instead use a time limit, such as a set number of months. Some policies offer options to increase it. Your declarations page shows the amount.
Things that affect a claim
- The cause must be covered. Loss of use generally applies only when the damage comes from a covered peril. A flood excluded from a homeowners policy won't trigger its loss of use coverage. Separate flood policies have their own terms.
- Civil authority. Many policies pay a limited period of ALE if authorities prohibit you from using your home because of damage to nearby property from a covered peril, such as a wildfire evacuation.
- Documentation. Keep receipts for everything and note your normal costs, so the difference is easy to show.
- Reasonable standard. Coverage is meant to maintain your normal standard of living, not upgrade it.
Renters and condo owners
Renters and condo policies usually include loss of use coverage too. For renters, it can pay the difference between their regular rent and the cost of temporary housing if the unit becomes unlivable after a covered loss.
The takeaway
Loss of use pays the extra cost of living elsewhere after a covered loss, not your normal bills. Check your limit, consider how long a major rebuild in your area might take, and keep careful records if you ever need to use it.
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