What Is Loss of Use Coverage?

Loss of use coverage is a standard part of most homeowners and renters insurance policies. Here’s what to know and how to use it.

Written by Hilary Collins / June 21, 2022

Quick Bites

  • Sometimes damage from a storm or other unfortunate event will make it impossible for you to stay in your home until it’s repaired. Loss of use coverage exists for this exact scenario.
  • Loss of use coverage will help cover the costs of your hotel, meals out and other expenses incurred during the time you aren’t able to access your home.
  • Loss of use coverage is meant to cover the difference between what you usually spend for living expenses versus what you spend when you’re not able to stay in your home for a period of time.
  • Keep all receipts and thoroughly document your reasoning for submitting expenses for reimbursement—an organized, well-documented claim is more likely to be accepted by your insurance company.

An important—and often misunderstood—part of your homeowners or renters insurance policy is loss of use coverage. Also known as additional living expenses (ALE) or Coverage D, loss of use coverage is there in the event that damage to your home makes it impossible for you to continue to live there for a period of time.

While the dollar amount will depend on your insurer and policy, loss of use coverage will help you pay for the costs that come up when you’re unable to stay in your house. 

Here are the basics on what loss of use coverage will pay for and how to use it.

Inside this article

  1. What is loss of use coverage?
  2. How loss of use coverage works
  3. Example of loss of use coverage
  4. FAQs

What is loss of use coverage?

According to the Insurance Information Institute, loss of use or ALE coverage is there to pay for the additional costs of living away from home when your home is uninhabitable due to an insured disaster.[1]  Loss of use coverage will help cover the extra costs that come with staying elsewhere while your home is being restored, including:

  • Hotels or rental homes

  • Eating out

  • Storage units

  • Laundry

  • Pet boarding

“​​In today’s environment with supply chain issues and labor shortages slowing down the time it takes to rebuild a home, it’s important to find out how much ALE you have,” says Loretta Worters, vice president of media relations for the Insurance Information Institute. 

Thankfully, your loss of use coverage limits are not connected to the amount an insurance approves for the repair—or rebuild in a worst-case scenario—of your home.[2]

However, loss of use coverage is unlikely to completely cover your expenses for staying away from home. Instead, its purpose is to offset the higher cost of living in a hotel and eating out so you aren’t spending more than you usually would.

For instance, if your usual weekly grocery bill is $200 but your restaurant tab after a week living away from home is $500, loss of use coverage will reimburse you for the $300 difference. Thus if you’re still paying your full mortgage or rent payments, loss of use should completely cover the cost of alternative living arrangements. (If you’re renting an apartment, your landlord might not require you to pay rent while the apartment is uninhabitable, but don’t assume.)

Tip

 If you rent out part of your house, loss of use coverage will reimburse you for the rent that your tenant would have paid if your home hadn’t been damaged.

Your total coverage amount and method of payout will differ depending on your insurance provider and your policy. Worters notes that depending on your policy and insurance provider, loss of use coverage could be limited by a percentage of your overall coverage or by a time frame when benefits run out. 

And if your standard homeowners policy’s coverage isn’t enough, you can often increase the time frame or dollar amount of your loss of use coverage for an additional premium.

How does loss of use coverage work?

Most loss of use claims will follow the usual claim process: You’ll submit a claim with all your expenses and wait for repayment. United Policyholders, a nonprofit that serves as a resource on insurance, recommends asking yourself, “Is this an expense I incurred because of the loss event?”[3] If the answer is yes, you should seek reimbursement for that expense.

While you’re waiting for your home to be repaired, you should keep all receipts organized in one place and carefully document your reasoning as to why expenses should be covered under loss of use. If you have doubts about whether something will be covered or not, talk to your insurance agent. After you file your loss of use claim, you can expect to be reimbursed for all expenses that meet your insurer’s qualifications. 

Tip

You have to continue paying your mortgage on your home while it’s uninhabitable. Make sure you stay up to date!

In some situations your insurer might be willing to give you a lump sum for ALE upfront rather than reimbursing you after the fact—this can help you with budgeting and ensure that you’re not spending more than your insurance company will cover.

Coverage limits for homeowners policies

Homeowner insurance policyLoss of use coverage
HO2 HO3 HO530% of dwelling limit
HO810% of dwelling limit
HO4 (tenants policy)30% of personal property limit
HO6 (condominium owners policy)50% of personal property limit
Source: International Risk Management Institute[4]

Example of loss of use coverage

Say you, your partner, your two children and cat live in a home you own near the coast. One summer, a hurricane hits your town and tears the roof off your home. What’s next?

First, take pictures and document the damage. Then do what you can to protect the home from further damage—in this case, tarps or another protective layer might prevent further loss. Then contact your insurance agent and file a homeowners claim. 

From there, you’ll need to find somewhere to stay until your home is liveable. Your plans might look something like this:

  • Find a hotel suite or rental unit for your family.

  • Find a place to board your cat.

  • Put your possessions that weren’t irreparably damaged into a storage unit. 

While this will likely be a stressful and difficult time, loss of use coverage can help cover or offset these costs. Your insurance will likely cover your hotel, pet boarding and the storage unit as well as offset any additional expenses for eating out if you don’t have access to a kitchen.

You might consider buying a waterproof pouch or file folder to store your receipts for meals out and other expenses you expect will be covered. You could also keep a log with your reasoning for why each expense should be covered under loss of use. Good records will allow you to defend your  reimbursement requests if the insurance company pushes back on any of the expenses.

In the end, your home will be restored, you’ll move back in and thanks to loss of use coverage, you will not have spent more than you usually would in the weeks you were living elsewhere. With a little bit of planning and organization, loss of use coverage can make a difficult chapter of your life a little bit easier.

FAQs

How much loss of use coverage do I need?

This will depend on many things, including the size of your family and your usual way of life. Talk to your insurance agent to see exactly how much coverage you have, whether it’s limited by either dollar amount or time frame and discuss if you need more than the standard amount for your policy.

Is loss of use coverage included with my homeowners or renters insurance policy?

While most standard homeowners and renters insurance policies include loss of use coverage, review your policy and ask your insurance agent to make sure that you have that specific coverage and the amount is sufficient.

Article Sources
  1. “What is covered by standard homeowners insurance?” Insurance Information Institute. https://www.iii.org/article/what-covered-standard-homeowners-policy
  2. “Making sure your home is properly covered for a disaster,” Insurance Information Institute. https://www.iii.org/article/making-sure-your-home-properly-covered-disaster
  3. “Survivors Speak: Additional Living Expense (ALE)/Loss of Use,” United Policyholders. https://uphelp.org/claim-guidance-publications/survivors-speak-additional-living-expense-ale-loss-of-use/
  4. “Additional Living Expense (ALE) Coverage,” International Risk Management Institute. https://www.irmi.com/term/insurance-definitions/additional-living-expense-coverage

About the Author

Hilary Collins

Hilary Collins

Hilary is an experienced finance writer with a passion for turning complicated topics into readable stories with real-world takeaways.

Full bio

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