What Is Loss of Use Coverage and What Does It Cover?

Many homeowners’ insurance policies include Loss of Use coverage, also known as Additional Living Expenses (ALE) coverage. If damage from a covered event requires you to move out of your home during repairs, this protection pays for additional expenses associated with the temporary living arrangement.

What does Loss of Use coverage pay for?

Recovering from an insured loss is inconvenient even under the best conditions. If that covered event makes your home uninhabitable, Loss of Use or ALE coverage typically pays for the difference between your usual monthly expenses and the temporary situation.

The following expenses are often covered by Loss of Use protection:

• Temporary housing, such as hotel stays or rental apartments
• Meals and food, beyond the typical grocery budget
• Transportation, such as higher commuting costs or additional parking fees
• Storage of personal possessions during the repair period
• Pet boarding, if temporary housing does not allow pets

When does Loss of Use coverage apply?

Loss of Use coverage only applies if the damage is caused by a covered peril, according to the terms of your insurance policy. Most homeowner policies cover damage from fire or lightning and windstorms, for instance. A burst pipe, however, may be excluded from a basic form policy. This is one of many reasons why it’s critical to know the specific coverages and limits of your homeowners insurance—before a loss happens.

For instance, homeowners insurance would cover a house fire caused by an electrical fault. If you needed to move out while contractors repaired or rebuilt the damaged area, Loss of Use coverage would pay for living expenses that exceed your typical monthly budget.

On the other hand, if you moved out of your home during an extensive (and voluntary) renovation, you’d be on your own for temporary housing and related costs.

How long does Loss of Use coverage last?

Loss of Use and ALE coverage usually ends once the home is repaired and you move back in—or you decide to relocate permanently. Like other insurance benefits, Loss of Use coverage also has limits. Usually, this protection is subject to a time limit (often 12 months), a set dollar amount (often a percentage of the dwelling coverage), or both. For policies with a dollar limit, coverage ends once this amount is exhausted, even if the time limit hasn’t been reached.

Review your homeowners policy with your insurance partner to find out how much Loss of Use coverage you have and what limits apply.

Do you have the insurance protection you need?

If you’ve been renewing your homeowners insurance without an annual review, it’s time to schedule a meeting. (In fact, you should consider finding a new insurance partner who will actively search for the best policy for your needs.) Life changes—such as family size, pets and job location—can affect your insurance needs. Also, construction costs have increased in recent years.

Annual insurance reviews ensure that your policy will meet your current needs, not the ones you discussed when buying your policy ten years ago. Plus, these meetings offer an excellent opportunity to ensure that you understand the specific coverages and limits of your policy.

Underinsuring your home—and Loss of Use coverage, by extension—could result in major out-of-pocket expenses in case of a loss.

If you have any questions about your current insurance policy or if you would like a free insurance review, please call us at 877-576-5222.