Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Mar 15, 2015

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When you are buying your insurance you must think about some serious issues. That’s why most homeowners are more likely to go to the dentist than shop for a new policy when the old one comes up for renewal.

Suddenly you have to think about what if your home is suddenly unlivable. In insurance terms that’s known as loss of use and specifically refers to events defined in your insurance policy that cause loss of use.

So what exactly does loss of use mean in home insurance coverage?

Sometimes people get a notion of living high on the hog after collecting insurance money. However, the real place of insurance is in more reasonable realms.

comparing home insuranceTypically, it pays just enough to allow you to subsist, according to your standard of living prior to a claim.

According to t he American Insurance Association, the three aspects of loss of use coverage include the following:

  1. Additional living expenses
  2. Fair rental value
  3. Prohibited use

It is best to understand that terms of this coverage before you need to file a claim on it. Even better, make sure you comprehend what this insurance involves when you are buying your coverage.

In particular, liability limits for loss of use are made up of a collective of these three areas. It is a total, not separate caps for the individual realms of this part of homeowners insurance.

Additional living expenses typically cover increases beyond your actual expenses to allow you to subsist at the same level you were prior to the insured event. You are still responsible for whatever it cost to have your home.

The added costs to move to a short-term apartment or hotel would be included in your additional living expenses.

The same goes for the added costs of food in an apartment or long-term hotel. For instance, it probably costs more to eat in an efficiency kitchen. It might involve buying more prepared foods.

Though, what you do need to know is that if your expenses actually go down then the insurer will deduct that expense from the additional living expenses.

Be sure to use the FREE comparison tool above!

Understand Rental Value

Even if you were renting out portions of your property out, your insurance will normally reimburse you for the loss of use, or the rent you would normally have collected. It is complicated, though not beyond understanding.

If you do file a claim, it is important that you make sure the insurers are including all of the aspects of coverage to which you are entitled.

Though, of course there is a portion of your policy that probably stipulates something you may not be prepared to learn. It is that the insurer does not have to remunerate you for rental losses if the renter moves out following a fire, for instance.

Even if it takes 60 days to get your home back into rental mode, you will not be reimbursed. Again, though, talk to your insurance agent to make sure you understand the insurance policy you actually are buying.

What is prohibited coverage?

home insurance - loss of useWhat prohibited use means is that your home is actually rendered uninhabitable. This coverage does not kick in if you are told to evacuate.

Instead, there has to be an actual insured event that makes your home uninhabitable.

Homeowners purchase insurance because they have to for their mortgage, but also for a sense of peace and security.

The two greatest fears for homeowners are loss of use and rebuilding your dwelling are the two major reasons people are inclined to purchase insurance.

Do know that all insurance policies are different, and that you may be able to find a carrier and insurance policy that will provide full loss of use coverage.

For instance, pay extra to get a carrier to cover all of your mortgage, food expenses, and temporary dwelling costs while your home is rebuilt. That coverage does exist, though do not assume you have it.

Other Aspects of Insurance Coverage

In addition to loss of use, there are other parts of coverage that are important. You will see something called dwelling coverage. That is the biggie, because it is what will pay to rebuild your house, or main structure, if it is destroyed or damaged from an insured event, such as a house fire or huge storm.

Keep in mind that flood is not insured on a homeowners policy, but instead under flood insurance.

If flooding occurs, your homeowners insurance will not pay a claim.

Instead, you will have to file a claim with your flood insurance. The caveat to this insurance is that you may only purchase flood insurance if you are living in an area that is proven to flood.

Beyond the dwelling, you will also see loss of use and something called other structures. Other structures covers against losses that occur to sheds, gazebos, unattached garages, and other separate buildings that are on your property. In addition you will also have the option to purchase coverage for your personal possessions.

Though, usually, the insurance coverage limits for your personal possessions caps out at a percentage of your overall home insurance coverage. It is imperative that you read this portion of coverage as well, rather than end up with a bad surprise down the line.

loss of use - life insurance If you have down-sized to a quaint cottage from a huge sprawling mansion, you may still have priceless antiques and therefore need more robust coverage limits.

If you do, you are not alone. Many homeowners need to purchase additional riders or addendums to their coverage in order to ensure higher-ticket items are insured.

In particular, if you have antiques, prized jewelry, or any types of specialty high-ticket items, strongly consider buying additional coverage.

Getting the coverage you need is overwhelming. It brings up what-ifs that most people are happy to live without thinking about ever.

Though, burying your head in the sand is not the solution to your problems. Instead, consider looking at the issue head on to make smart decisions before any disasters have a chance to strike.

Always compare quotes before making any decisions. Use the FREE tool below to get started!