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Homeowners insurance — or renters insurance, if you don’t own your home — will cover you if your belongings are damaged or stolen. However, not every single event is covered; the damage or loss must be a result of a named peril, also known as a covered event listed in your insurance policy.
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” 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 to your property or belongings 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. 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
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge or overflow of water or steam
- Sudden and accidental tearing, cracking, burning, or bulging
- Sudden and accidental damage due to short circuiting
- Volcanic eruption
Source: Data from The Zebra and Lemonade
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.
Steve Wilson, senior underwriting manager at Hippo Insurance, gave these steps for filing a claim with your homeowners or renters insurance company:
- Contact the insurance carrier to file a claim.
- Take pictures of the damage before disposal and cleanup.
- 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.
Ronda Lee is an associate editor for insurance at Personal Finance Insider covering life, auto, homeowners, and renters insurance for consumers. She is also a licensed attorney who practiced litigation and insurance defense.
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