Most homeowners and renters insurance policies are named peril policies, meaning you’re only covered for perils that are explicitly named in your policies. Named peril coverage includes 16 perils, such as fire and lightning, windstorm and hail, and freezing.
But what about damage that makes your home or rental temporarily unlivable, such as a kitchen fire or extensive water damage? You could be eligible for coverage that reimburse the costs of temporary housing as well.
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 renters insurance policies and provides reimbursement for temporary housing when a peril causes damage that makes your home or rental unit inhabitable. The terminology may be different for homeowners versus renters policies.
For “loss of use” and “additional living expenses,” much depends on your insurance carrier and it varies by provider. Some carriers will reimburse you for temporary housing. Others may have a list of housing alternatives.
The amount of coverage is based on your policy limits. For renters insurance, it may be equal to your monthly rent. For homeowners, it will be a percentage of your dwelling coverage amount. That is why it’s important to talk with your insurance provider before leaving your residence and just assuming you are covered.
If you are a renter, displacement coverage is typically referred to as “loss of use.” Remember that renters insurance only covers damage to your belongings, not damage to your unit, because the landlord is responsible for damage to the building.
In addition to your belongings, homeowners insurance covers damage to your home and to structures on your property, like a shed under dwelling coverage. If you have homeowners insurance and your home is unlivable due to damage from a peril and you need to relocate, displacement coverage may be referred to as “additional living expenses,” although “loss of use” can be used.
In order for “loss of use” to be triggered, the damage must be related to a peril or covered event in the policy.
Named peril homeowners and renters insurance typically covers damage when these events occur:
Fire or lightning; Windstorm or hail; Explosion; Riots; Aircraft; Vehicles; Smoke; Vandalism; Theft; Falling objects; Weight of ice, snow, or sleet; Accidental discharge or overflow of water or steam; Sudden and accidental tearing, cracking, burning, or bulging; Freezing; Sudden and accidental damage due to short circuiting; and Volcanic eruption.
Contact your insurance provider before leaving your home
Ashlee Tilford, managing editor for Insurance.com, told Insider that most homeowners have a misconception of what constitutes “inhabitable.” Don’t assume that your insurance carrier will pay additional living expenses, because the definition of inhabitable varies by company.
If you’re considering leaving your home due to damage, contact your homeowners or renters insurance provider first and take detailed pictures of the damage. Make sure to lock up and secure the premises as well.
How to file a loss of use claim
Steve Wilson, senior underwriting manager at Hippo Insurance, gave these steps for filing a claim with your homeowners or renters insurance company:
1. Contact the insurance carrier to file a claim.
2. Take pictures of the damage before disposal and cleanup.
3. Prevent further damage to your property.
Don’t do something you’re not comfortable with/that doesn’t look safe. Homeowners insurance has a condition to prevent further loss. Focus on a temporary fix instead of something long-term so insurance can properly access a permanent fix by a professional.
Claims as a result of a catastrophic event generally take longer and claimants can expect delays. Through FEMA, the federal government offers resources for disaster-stricken areas. You can find information about financial assistance on the USA government website.
There are also resources from relief organizations like the Red Cross.
What questions should I ask contractors
During a disaster, most homeowners insurance companies are scrambling for the same resources — contractors, electricians, and plumbers — which is why it is hard to get them on a service call.
Before hiring a contractor, contact your homeowners insurance company — they may have a list of approved contractors. Make sure that your company will pay for the contractor before signing a contract.
When calling for contractor estimates, ask how far out they are booking for repairs to get an idea of how long it will take before repairs begin.
Renters should address any building and structural damage with their landlord or property management company, because it’s the owner’s responsibility. Renters insurance covers your belongings in the rental unit.
Avoid cold callers and door-to-door scammers
It isn’t unusual for contractors working on a neighbor’s property to knock on other doors in the neighborhood to see if they need assistance. However, use good judgment and make sure they are actually hired by your neighbor. Ask for license and insurance credentials from any contractor going door-to-door.
Some scammers cold-call homeowners asking to switch homeowners insurance providers. If a cold caller is offering to pay for damage to your home if you switch providers or saying “take this deal today because it won’t be available tomorrow,” it’s probably a scam.
Ronda is an attorney, writer, and entrepreneur. She is a contributing writer for the Huffington Post. Originally from Chicago, she has lived in Los Angeles and New York. She loves to travel and is passionate about education equity, especially for first generation college students.