Renters and homeowners insurance are two types of insurance that many people buy to protect their finances from natural disasters. You may need additional coverage if your home is so badly damaged that it is impossible to live there while repairs are made. Additional living expenses coverage (also known as loss of use coverage) is intended to cover the cost associated with being displaced.
Many homeowners, condo owners, and renters insurance policies include additional living expenses coverage. However, not all policies provide this coverage. How does additional living expenses coverage work? And how much should you have? Bankrate’s insurance editorial staff conducted research to help you navigate additional expenses coverage.
What are the additional living expenses?
Additional living expenses coverage pays for costs incurred when you are forced to move from your home due to a covered loss. For example, if your home is uninhabitable after sustaining tornado damage, your additional living expenses coverage could help pay for your lodging, food and other expenses until you can safely live in your home again. You may need to keep a detailed list of all your expenses in case you are faced with this scenario. You may be able to get loss of use coverage that will cover many often overlooked expenses.
Most people’s primary living expense will be room and board. This could include a hotel bill, or even renting a home. Other expenses will likely be covered by your home insurance provider. While you are away, you may have to pay for a laundry or laundromat. You may have to board your pet. It is possible to eat out more often, particularly if you are not able to cook at home.
What are the additional living expenses that can be covered?
You may be wondering what additional living expenses are covered under your home insurance. If so, then you might want to consider room and board. These are your largest expenses. These expenses are usually covered by your loss of use insurance. These expenses are usually covered by loss of use coverage.
A family home that has been severely damaged by a fire is an example. The family will have to move while the home is being repaired. Additional living expenses insurance covers them for accommodation in hotels. They may also be reimbursed for meals at restaurants if they have no kitchen. Additional living expenses coverage may also cover laundry fees if the hotel doesn’t have them. If the hotel has a no pet policy, insurance may also pay for the cost of boarding the dog until it is able to live again.
Keep in mind that your insurer will review your receipts to determine if your expenses are reasonable. While your provider may not object to you paying for meals or lodging, unreasonable expenses such as extravagant meals or penthouse suites could be denied. Your insurance company may refuse to cover your claim if you spend too much. They could even accuse you of fraud. Additional living expenses coverage won’t cover these costs if there is a covered loss. If your home is damaged by a peril that is not covered by your home insurance policy, your additional living expenses coverage will not come into play.
What additional living expenses coverage should I have?
Additional living expenses coverage is typically a percentage of your dwelling coverage. This means that you don’t have to select the coverage amount. You may have the option to increase your coverage, or to opt for “actual loss sustained” coverage. This means that the insurance company will pay all reasonable expenses and there is no dollar limit on coverage.
Financial experts recommend that you purchase as much extra living expenses coverage as possible, as you cannot predict the type of disaster that will strike you or how long you might be without it. Insurance professionals also recommend keeping track of costs for hotel stays, rental cars, and meals at restaurants to determine how much you will need for 30-60 days of displacement.
Questions frequently asked
Are loss of use and additional living expenses the same thing?
Yes. Yes.
Are additional living expenses insurances common?
Yes. Yes. Most homeowners insurance policies provide additional coverage for living expenses. The amount included in your homeowner policy may not cover all your needs in an emergency. You might want to determine what additional living expenses coverage you have and adjust your policy accordingly.
How long can additional living expenses coverage last for?
Your insurance company will typically continue to pay additional living expenses until your home is ready or until your coverage level is met.
How are additional living expenses insurance calculations calculated?
Additional living expenses coverage can be calculated by a percentage of either the dwelling amount (for homeowners policies) or the personal property value within a renters policy.