Normal Versus Additional Living Expenses
The basic idea of loss of use coverage is that, in the event your policy is already activated by a covered type of damage or loss, extra living expenses incurred due to loss of access or use of your home are also covered.
Loss of use cover typically applies when you can’t live in your home for a time due to reconstruction efforts or even certain less all-encompassing repairs. You have to pay to live in a hotel room, pay extra for meals out, incur extra travel expenses, pay to move and temporarily store property, or pay more for utilities if, say, your power is out and you have to use a generator or have to use more expensive heaters while your central heat is down.
You will need to establish your normal living expenses ahead of time with your insurer, keep all relevant receipts representing additional expenses, and then file a claim based on the difference.
How Loss Of Use Cover Works
With most insurers, 100% of additional living expenses will not be covered by your policy. Typically, there will be a limit. That limit may be a dollar amount (so 100% would be covered until you hit the limit, then 0%). But the limit is often a percentage of the additional expenses, usually around 20%.
Ask if your prospective insurer includes loss of use, additional living expenses, or Part D cover: it’s all the same thing.
Also realize your home has to be inhabitable or unusable in some way for the loss of use cover to kick in. Plus, the extra expenses must be incurred in connection with a covered loss. The only exception to the last-mentioned stipulation is if you lose access to your home due to a government-issued evacuation order or due to roads being closed, say, during a flood or wildfire.
Once the home is habitable again, the loss of use cover stops. However, it continues even if your policy expires, up to the limits of the policy.
The Rental Income Clause
Another element of loss of use coverage in homeowners insurance policies is that of recouping lost rental income. This can work with commercial rental property, but it also applies if you are renting out your home or a portion of your home to someone for extra income.
To collect, you have to report your rental income to your insurer and then report when it is lost due to something covered on your policy.
Thus, loss of use coverage is an important part of your homeowners insurance, and you do well to ensure you have enough of it even if you need to purchase extra from your insurer.
To learn more about loss of use and other aspects of homeowners insurance, or for a free quote, contact Flagler County Insurance Agency today!