Loss of use insurance and additional living expenses for owners and tenants

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Home insurance – or tenant insurance, if you don’t own your home – will cover you if your belongings are damaged or stolen. However, not all events are covered; the damage or loss must be the result of a named peril, also known as the covered event listed in your insurance policy.

Most homeowner and tenant insurance policies are named risk policies, which means you are only covered for the risks that are explicitly named in your policies. The named perils coverage includes 16 perils, such as fire and lightning, windstorms, hail and frost.

But what about damage that makes your home or rental temporarily uninhabitable, such as a kitchen fire or major water damage? You may also be eligible for coverage that reimburses the cost of temporary accommodation.

Loss of use versus additional living expenses

“Loss of use” coverage, also known as “additional living expenses” or ALE, is included in most homeowners ‘and tenants’ insurance policies and provides reimbursement for temporary accommodation when a peril causes damage that causes damage. make your house or rental unit habitable. The terminology may be different for landlord and tenant policies.

For “loss of use” and “additional living expenses” it all depends on your insurance company and it varies by provider. Some carriers will reimburse you for temporary accommodation. Others may have a list of housing alternatives.

The amount of coverage is based on the limits of your policy. For tenant insurance, it can be equal to your monthly rent. For homeowners, this will be a percentage of the amount of coverage for your home. This is why it is important to speak with your insurer before leaving your residence and to assume that you are covered.

If you are a renter, travel coverage is generally referred to as “loss of use”. Remember that tenant insurance only covers damage to your property, not damage to your home, as the landlord is responsible for damage to the building.

In addition to your property, home insurance covers damage to your home and structures on your property, such as a shed under home warranty. If you have home insurance and your home is uninhabitable due to peril damage and you need to move out, travel coverage may be referred to as “additional living expenses”, although “loss of use” may be. used.

For “loss of use” to be triggered, the damage must be related to a peril or event covered in the policy. Landlord and tenant named peril insurance typically covers damage when these events occur:

  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Riots
  • Airplane
  • Vehicles
  • Smoke
  • Vandalism
  • Flight
  • Falling objects
  • Weight of ice, snow or sleet
  • Accidental spill or overflow of water or steam
  • Sudden and accidental tearing, cracking, burning or swelling
  • Frozen
  • Sudden and accidental damage due to short circuit
  • Volcanic eruption

Source: Data from Zebra and Lemonade

Ashlee Tilford, editor-in-chief of Insurance.com, told Insider that most homeowners have a misconception of what constitutes “habitable.” Do not assume that your insurer will pay additional living expenses, as the definition of habitable varies by company.

If you are planning to leave your home because of damage, first contact your home or tenant insurance provider and take detailed photos of the damage. Also make sure to lock down and secure the premises.

How to file a claim for loss of use

Steve Wilson, Senior Underwriting Manager at Hippo Insurance, provided these steps for filing a claim with your home or tenant insurance company:

  1. Contact the insurance company to file a claim.
  2. Take photos of the damage before disposal and cleaning.
  3. Prevent further damage to your property.
  4. Don’t do something that you are not comfortable with / that does not seem safe. Home insurance has a condition to prevent further losses. Focus on a temporary solution rather than a long term solution so that insurance can properly access a permanent solution professionally.

Ronda Lee is Associate Insurance Editor at Personal Finance Insider and covers consumer life, auto, home and tenant insurance. She is also a licensed lawyer who has practiced insurance litigation and defense.


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