Loss of use coverage: what your policy pays while you can't live at home

What is loss of use coverage?

Loss of use is the part of a home or renters policy that pays when you can't stay in your home after a loss the policy covers. On a standard homeowners policy it is usually called Coverage D. You may also see it called additional living expense, or ALE, which is the piece most people use.

It only applies when the damage comes from a peril your policy covers, such as a fire, a burst pipe or wind damage. If the cause is excluded, loss of use is usually excluded with it. Standard homeowners policies don't cover flood, and flood insurance through the national program does not pay living expenses at all.

What does additional living expense cover?

Additional living expense pays the difference between what it costs you to live while displaced and what you would normally spend. Common examples:

• A hotel, short-term rental or apartment while the house is repaired.
• Restaurant and takeout meals, above what you usually spend on groceries.
• Extra miles driving to work or school from the temporary place.
• Laundry, if you had a washer at home and now pay per load.
• Pet boarding, if the temporary place doesn't take pets.
• Moving and storage costs, and utility hookups at the temporary home.

Bills you would pay anyway are not part of it. If you still owe your mortgage, you keep paying it, and the policy pays for the temporary housing on top. If a bill stops while you're away, such as gas for a house that is shut off, the savings come off what you claim.

Some homeowners policies also pay fair rental value: rent you lose if part of the home was rented out and the tenant has to leave.

Only the increase counts

This is where most loss of use claims go wrong. The insurer compares what you spent with what you would have spent, and pays the gap. A month away from home might look like this:

Keep a simple record of what you normally spend on groceries, commuting and utilities before the loss. A few bank or card statements from the months before are the easiest proof.

How long does loss of use last?

Usually until your home is repaired and livable again, or until you settle somewhere permanently if you decide not to go back. It is measured by the shortest reasonable time to repair, so a rebuild that stalls for reasons the insurer sees as yours may not keep the payments going.

Two limits cap it. The first is a dollar limit, often set as a share of your dwelling or personal property limit. The second, on some policies, is a time limit such as 12 or 24 months. Both are on your declarations page or in the policy wording, so check your policy before you sign a long lease.

Many policies also pay for a short time, often up to two weeks, when a civil authority such as the fire department bars you from your home because of damage nearby, even if your own house is fine.

What to keep for an ALE claim

• Every receipt for lodging, meals, laundry, mileage, storage and pet care. A photo of each on your phone is enough.
• A note of your normal monthly costs for the same things, with statements that show them.
• The dates you left home and, later, the date you moved back.
• Any written approval from your adjuster for a rental, a lease length or a nightly rate.

Ask your adjuster early what they will approve before you commit to a rental. Many insurers will pay the landlord directly or set up housing for you, which saves you carrying the cost on a credit card.

Loss of use and the rest of your claim

Living expenses are paid separately from the house and from your belongings, and they come out of their own limit. Moving out also makes the rest of the claim harder to keep track of, because you are no longer in the house to check what was there.

Start your contents list while the house is still fresh in your mind. Our guide to making a home inventory list after a loss walks through it room by room, and how long an insurance claim takes explains why repairs and payments can stretch for months.

Where Indemnia helps

While you sort out where to live, Indemnia builds the list of belongings your insurer needs. It finds purchases in your email receipts and lists what it sees in photos, with today's price on each item, so the contents part of your claim keeps moving even when you're away from the house.