In our “Coverage of the Month” blogs, we explain the ins and outs of each coverage type in your homeowners insurance policy. This month, we’ll take a look at another section of your policy, Coverage D. It’s sometimes called additional living expenses (ALE), or “loss of use” coverage.
THE INS: What’s Covered?
This is the one you don’t ever want to have to deal with, but it’s there for a reason. If your house were to become temporarily unlivable, it kicks in. It covers the costs of temporarily living elsewhere while your house is being repaired. It can include hotel bills, storage costs, and even restaurant bills and pet boarding costs.
Of course, your exact coverage will depend on how much homeowners insurance coverage you obtain in this area. But the idea is to help you cover as many expenses as possible when you’re stuck without your home for a bit.
Which Perils Are Covered?
Ideally, Coverage D will kick in whenever your house is damaged so badly you have to temporarily move out of it. For the coverage to apply, however, the damage requiring you to move must result from something that’s covered in the first place.
Standard covered perils for Coverage D include things like a tree crashing into your house, or a fire. In some cases, it may even cover vandalism. But remember: Flood coverage is usually a separate item. So if you live in flood-prone areas, you should talk with your agent about your options for covering living expenses while dealing with flood damage.
Choosing specific perils to cover is an ideal conversation to have with your insurance agent or advisor, who can tailor your coverage to fit your specific circumstances. But yeah — if your house is temporarily zapped away by aliens and that’s not specifically covered in your policy, Coverage D can’t help you.
THE OUTS: What Isn’t Covered?
There is often a limit to ALE/loss-of-use coverage. It’s usually between 20-30% of your home’s insured value. Going beyond this limit means paying out of pocket.
There are a few exceptions under premier insurers that offer unlimited loss-of-use coverage as standard. The cost of those policies will be higher, of course.
Fortunately, deductibles are often waived for this type of claim. But you’ll probably be on the hook for deductibles related to any related personal property (Coverage C), dwelling (Coverage A), and other structures (Coverage B) claims.
Minding the Restrictions
Now, just because you’re forced to live in a hotel and dine out more often doesn’t mean you have an excuse to live the high life. Insurers will have rules and restrictions on cost, possibly imposing limits on what determines necessary expenses.
The person handling the claim can point out reasonable accommodations. How much you’re reimbursed is based on the insurer calculating the difference between what your normal living expenses would be versus how much you spend while gone.
Coverage D in Practice
Keep Those Receipts!
Should the worst happen and you’re forced out of your house for a spell, be sure you keep all the receipts you can. Anything that counts as reasonable living expenses can be claimed, but you’ll need proof. There could be emergency exceptions, but those are rare and must be proven as well. Remember, covered ALE/loss-of-use expenses can include:
Dining out (within reason!)
Rental property or hotel costs
Get Real Paid
Typically, reimbursements are paid monthly, after expenses have been incurred.
Keep in mind you’ll be getting a check based on your normal living expenses versus what you’re spending above that. So if your normal life costs you $1,000 a month, but because you’re in a hotel and have to eat out and use a laundry, your costs are $2,000 for that month, you should get a check for the extra $1,000 in expenses.
Get Informed, and Get Covered
Hopefully, Coverage D is the part of your homeowner’s insurance policy you’ll have to worry about most rarely. Just don’t forget to worry about it when you’re purchasing your policy. You’ll be glad it’s there for you when you need it the most.
Want to make sure you’ve got enough ALE/loss-of-use coverage in your homeowners insurance policy? One of Covered’s independent advisors will be happy to do a free policy review. Give us a call at (303) 302-9927 or send us a message.