When disaster strikes your home, loss of use coverage (“Coverage D”) pays for the extra costs of living elsewhere during repairs – hotel bills, restaurant meals, temporary rentals, and other expenses that exceed your normal living costs. Despite its importance, this critical coverage is an often overlooked aspect of homeowners insurance.
Most standard homeowners insurance policies offer “capped value” coverage, typically 10-30% of your dwelling coverage (“Coverage A”). For example, if your home is insured for $500,000 with 20% loss of use coverage, you have $100,000 available – but once that limit is hit, coverage stops regardless of whether your home is ready. Some carriers offer an alternative coverage option known as “actual loss sustained” coverage, which pays your reasonable additional living expenses without a predetermined dollar amount cap.
However, many “actual loss sustained” coverages have a time limitation, often a 12 or 24-month time limit from the date of loss depending on the carrier and your location. If your home isn’t ready for occupancy within that timeframe, coverage stops even if you still have legitimate expenses. With today’s construction delays and material shortages, 12-month rebuilds are increasingly common for significant losses.
Don’t assume your standard coverage is adequate. Ask your insurance agent to review the details of your loss of use coverage and consider a coverage increase if one is available. Any additional premium for enhanced coverage could save you much more when you need it most.