Picture this: Your home is damaged by a huge storm, earthquake or other natural disaster, and you have to move out while it’s repaired or rebuilt.
But where are you supposed to go? And how on Earth are you going to pay for it?
That’s where loss of use coverage comes in. It’s something we never hope to use, but if you ever do need it, you’ll be glad you have it.
What Is Loss of Use Coverage?
Also referred to as additional living expenses (ALE) insurance or part D coverage, loss of use homeowners insurance can cover necessary temporary living expenses if you have no choice but to move out of your home or even rental property while it’s being repaired.
To get a better understanding of your additional livings expenses¬—and eventually be reimbursed for them—you first have to determine your normal living expenses, which include:
• Mortgage or rent.
• Utilities, including water, electricity, cable, garbage removal, etc.
• Transportation, including miles driven to work and public transportation.
• Food, including the average cost of meals per person and your average weekly grocery bill.
Loss of use coverage can cover any additional living expenses incurred, meaning any necessary expenses that exceed what you’d typically spend. For example, if you usually spend $300 a month on groceries and your monthly food spending doubles because you’re ordering takeout, your policy could cover the difference.
In other words, loss of use coverage can provide you and your family with money to maintain your current lifestyle and compensate you for the additional costs of living somewhere else when your home is deemed uninhabitable until it is repaired.
So, what are additional living expenses? Loss of use coverage covers more than you might think:
1. Moving into a temporary residence.
Not too keen on shacking up with your in-laws while you’re waiting out your home’s rebuild? Loss of use coverage can pay for you to live in a place that’s just as nice as your home, so you won’t have to worry about living in a cramped third story walk-up or seedy motel.
Even though many hotels and short-term rentals will reduce your rate the longer you stay, it can still wind up being a whopping expense. You’ll be glad you have insurance to offset the cost.
2. Living off of takeout.
A family of four can easily spend upward of $1,000 a month on food at home, but you won’t have much use of your kitchen if you’re waiting for your home to be rebuilt. If you’re living out of a hotel room, even one with a small efficiency kitchen, there’s only so much you can do to curb excess food spending.
Loss of use coverage can cover the difference between what you usually spend on food at home and what you’re spending on groceries and takeout.
3. Getting slapped with moving costs and storage fees.
A local move can cost anywhere from $500 to $1,000 for a three-bedroom house, according to HomeAdvisor. The bigger your home, the longer the move will take—and the more you’ll pay. It’s also more expensive to move on a weekend, at the beginning and end of the month, and during “busy season,” which runs May through September.
Your temporary digs probably don’t have room for your leather sectional or baby grand, and that stuff has to go somewhere. A 10’ x 20’ storage unit, which is large enough to fit the furniture, appliances and contents of a two- to three-bedroom home, could cost about $200 per month. Expect to pay more if you want a climate-controlled unit or live in a larger city.
Thanks to loss of use coverage, your whole move could be completely covered.
4. Keeping the laundromat in business.
Trips to the laundromat add up quickly too. Say it costs $4 to wash and dry a single load of laundry. When you factor in clothing, bedding and towels, a typical family of four could generate eight to 10 loads of laundry per week. If you’re washing eight loads of laundry per week over the course of three to four months, you could spend $500 on laundry alone. Loss of use coverage can help keep your coins in your pocket.
5. Shelling out for extra parking and transportation costs.
Having no choice but to temporarily relocate could mean an even longer commute to the office, your children’s schools and their after-school activities. Loss of use coverage can cover the car mileage, public transportation costs and parking fees that are in excess of what you’d typically have to spend.
6. Paying for pet boarding.
Pet boarding rates typically run $25-$50 a day depending on where you live and how many pets you have. Since it can take a few months to rebuild a house, the cost of boarding your dog or cat—even if the kennel cuts you a long-term deal—can seriously add up over time. Without loss of use coverage, you could end up forking over hundreds of dollars to keep Fido or Fluffy cozy while you’re waiting for your house to be rebuilt.
How Much Loss of Use Coverage Is Enough?
Loss of use coverage is usually based on your dwelling coverage, which is the type of coverage that pays to repair or rebuild your home after it’s been damaged by severe weather, fire, etc. For most people, loss of use coverage is approximately 20%-30% of their dwelling coverage limit.
Dealing with the aftermath of a disaster that damages your home in enough of a headache. Loss of use coverage can provide the much-needed financial assistance—not to mention peace of mind—that you need if you and your family unexpectedly have to move out of your home. Talk to your insurance agent or meet with a Homegrown Pro in your neighborhood and review your homeowners insurance or renters insurance policy to make sure you’re covered.