Home Insurance – Loss of Use
Homeowners insurance is a form of insurance used by homeowners to protect their homes and personal property against accidents that are covered. When deciding on a home insurance policy, a term comes into play, known as loss of use coverage.
Loss of use coverage, also known as additional living expenses coverage, is an insurance policy option available to homeowners to insure their living expenses if their house gets damaged by an insured hazard that requires you to live somewhere else.
Loss of use coverage helps the affected homeowner pay for every expense spent while your house is being repaired, from fuel expenses to hotel bills and groceries, etc.
Take for example a case where you rent your insured house to the public, and an accident you’re insured for happens that causes your tenant to live elsewhere. Loss of use coverage will cover the rent cost of the individual who then has to go live elsewhere.
Loss of use coverage can cover a lot of expenses in different situations. For instance, if you go on a trip away from your insured property for some time, loss of use coverage will reimburse you for all you spend on the road as far as you have the receipts to show for it.
How Does Loss of Use Coverage Work
Many insurers have a loss of use coverage limit of 20% to 30% of your home’s insured value. This means if your home has an insured value of $100,000, you will have a loss of use coverage of $20,000 to $30,000. But some top insurers like AIG and Chubb offer unlimited loss of use coverages. This means any amount you spend on reasonable expenses will be reimbursed to you.
To make use of your loss of use coverage, your home has to be affected by an insured accident that will need you or your tenant to leave home. An example is if a hurricane severely damages your home, and the house is insured for that accident. It will cover any reasonable expenses you incur while you stay away from home until you finish the reconstruction.
What Types of Expenses Are Covered
There are three main types of additional expenses covered associated with loss of use coverage.
Additional living expenses
During the period you spend away from your home when an insured accident causes you to stay away from your house. In most cases, the living expenses of the affected family increases. The insurance company will then cover the difference between the increased living expenses and your normal expenses when everything was fine. Expenses covered include hotel bills, temporary apartment rent, public transportation, storage unit bills, additional food expenses, parking costs, and a lot more.
Lost rent payments
If you rent your property, then the insurer will pay you the lost rent until they are done reconstructing the house for you. It typically has a limit of 12 months.
A prohibition from using the property
If the government prohibits you from using your property that is already insured with loss of use you are covered. In that case, the insurer will reimburse you any additional expenses you incur during the time away from your home.
To use your loss of use policy, you have to make sure you have the receipts for every reasonable thing you spend on before they can reimburse you back.
Your insurance company will ask you to fill a form that includes details of your normal home expenses, which will be subtracted from the current expenses you incur during your stay away from your house. They will then reimburse the rest to you.
To learn more about home insurance visit us at https://www.kbgagency.com/personal/homeowners-insurance/ or call us at (509) 242-3244 for a free home quote.