What Is Loss of Use in Renters Insurance?

Loss of use coverage is a component of every renters insurance policy. It's responsible for temporary housing expenses and other incurred costs if your rented unit becomes uninhabitable due to a covered peril. For instance, in the unfortunate event of a fire, loss of use coverage steps in to ease your burden. It pays for hotel expenses, transportation and any additional costs arising from your need to relocate up to the designated limits, usually a certain amount per day.

By understanding the scope of loss of use coverage, you can empower yourself and make informed choices when selecting the right insurance policy for your needs.

In renters insurance, loss of use coverage ensures you have a place to stay if your rented home becomes uninhabitable due to covered perils. For instance, if your unit gets damaged in a fire and becomes uninhabitable, loss of use will pay for your hotel costs and additional food expenses. It’s a key part of every standard renters insurance policy, where you can increase and decrease limits accordingly.

Loss of use in renters insurance consists of three key aspects: additional living expenses, fair rental value and prohibited use. These components work together to support you during challenging times without being financially burdened.

Additional living expenses (ALE) coverage provides financial support when you face a temporary displacement from your rented home due to covered incidents. For instance, if a severe storm damages your rental property, making it unsafe to stay in, this coverage would pay for your temporary residence, such as an apartment or hotel.

ALE coverage also accounts for additional costs for transportation, meals and even storage fees for personal belongings. For example, if you spend more to go to school or more to eat due to living in your temporary rental unit, you will be reimbursed for the increased costs of transportation and food.

If you sublease a part of your unit, be it a room or a garage, fair rental value reimburses you for lost rental income should a covered peril prevent you from collecting rent. For example, if a fire breaks out in your rental property and you sublease your garage, rendering it unusable, fair rental value coverage would compensate you for the lost rental income during the time it takes to repair the damages.

Prohibited use coverage acts as a safety net if you are legally barred from occupying your rental property, whether it’s due to government directives or other restrictive circumstances. For instance, if a neighbor is involved in a police investigation and authorities close off access to your rental unit, prohibited use would cover your temporary housing costs.

Another example is if authorities issue an evacuation in response to an impending natural disaster, like a wildfire or hurricane. In such cases, prohibited use coverage would cover alternative housing costs during the evacuation period.

When a covered peril disrupts your living situation, loss of use coverage steps in to handle the additional costs. This could include the extra commuting costs from your temporary residence to your workplace or the cost of boarding your pet if pets aren't allowed in your temporary accommodation. The following expenses are usually covered:

• Temporary accommodations, like hotels or rented apartments
• Extra commuting costs
• Additional food expenses if you're eating out more often
• Pet boarding if your temporary accommodation doesn't allow pets
• Storage costs for your belongings
• Laundry services if your temporary accommodation doesn't have laundry facilities
• Moving truck costs to bring your things to storage or a temporary unit
• Childcare costs if your usual arrangements are disrupted
• Additional utilities or internet services

Loss of use coverage will only pay up to the maximum limit stated in your policy — even if you’re still waiting for repairs, your insurer will no longer cover expenses if you’ve reached your limit. You can get more coverage for loss of use, but you’ll need to pay a higher premium.

Additionally, loss of use coverage may only apply for a certain period of time, depending on your policy. It’s often the shortest of the following:

• The specified maximum period on your policy, usually 12 or 24 months
• The duration required to repair or replace the damage
• The time necessary to establish a permanent residence elsewhere

For instance, even if your policy can cover you for up to 12 months, if it takes only two months to find and move to another long-term rental unit, it will only cover you for two months.

While loss of use coverage can be a financial lifeline during a crisis, it doesn't cover every scenario that might force you out of your home. For instance, if you're carrying out voluntary home improvements and need to move out temporarily, this wouldn't be covered. Similarly, if a peril not covered by your policy, such as a flood, renders your home uninhabitable, loss of use won't apply. Here are some scenarios that aren't covered:

• Non-covered perils: Loss of use coverage does not provide coverage for displacement caused by perils not listed in the policy. For instance, if your rental property becomes uninhabitable due to damage caused by pests or mold, which are not covered under the policy, your temporary housing and living arrangements expenses would not be reimbursed.
• Voluntary temporary relocation: If you choose to temporarily relocate for personal reasons unrelated to a covered event, you will not be reimbursed. For example, if you decide to stay with family or friends when the rental property is habitable, the insurance will not cover your expenses.
• Upgrades to living conditions: While loss of use coverage pays to maintain your standard of living — it won't upgrade it. For instance, if you originally lived in a studio apartment, you won't be able to get coverage for a penthouse or a five-star hotel.

Filing a loss of use claim requires careful attention to detail and a thorough understanding of your insurance policy. It's important to remember that the goal is to restore your usual standard of living, not to provide an upgrade. Here are some essential tips to remember:

• File your claim as soon as possible. This can help expedite the process.
• Retain all receipts for additional living expenses. These will be necessary for reimbursement.
• Document your usual living expenses. Your insurer may use this as a baseline for your claim.
• Stay in regular contact with your insurance company. This can help ensure your claim is processed smoothly.
• Know your policy limits. Be aware of how much coverage you have and the duration of that coverage.
• Understand the perils covered by your policy. Loss of use applies only to covered perils.
• Keep in mind that loss of use coverage aims to maintain your usual standard of living, not to enhance it.