Besides your loss of property, one of the main concerns you may have if your home has been damaged by a fire or other calamity is how to pay for your living expenses as you wait for it to be repaired.
Fortunately, the standard homeowner’s policy will cover you for “loss of use” – meaning your living expenses like staying in a hotel while your home is repaired. This coverage is known “additional living expense,” and it is designed to reimburse the insured for the cost of maintaining a comparable standard of living following a covered loss that exceeds the insured’s normal expenses prior to the loss.
Actually, the standard homeowner’s policy contains three loss-of-use coverages: additional living expense, fair rental value, and what is known as “civil authority prohibits use.” And typically, these coverages are subject to a limit equal to 30% of the dwelling limit under homeowner’s insurance.
So, if you have a policy to cover the full value of your $300,000 home, the policy would cover $90,000.
Additional living expense
Additional living expense coverage pays for the homeowner’s necessary increase in living costs when the home, damaged by a covered cause of loss, becomes unfit to live in.
For example, assume a fire guts your kitchen and two bedrooms. Since your policy covers fire and the home is unsafe for the family to occupy, this coverage will pay the extra amount you must spend to live elsewhere for a period of time.
But, the insurance company will pay only the amount necessary for the family to maintain its normal standard of living. If you were not living in a luxury condo before the loss, the insurer will not pay for you to live in one after.
Loss of-use coverage covers any additional living expenses – or any necessary expense that exceeds what you normally spend.
For example, if you usually spend $500 per month for groceries and, while your home is being repaired, you spend $700 a month since you have to dine out instead of cook at home, your policy will cover the $200 difference.
Examples of additional living expenses may include, but are not limited to:
• Hotel or rental home charges
• Food and utility expenses
• Additional car mileage
Please note that insurance companies in NY will pay for the shortest period of time necessary to repair or replace the damaged property or to permanently relocate.
It is important to note that the insurance pays only for the increase in costs, less any costs that you normally pay for.
Fair rental value
This coverage applies to homeowners who rent out part or all of the premises. Should a covered cause of loss damage the home and make it uninhabitable, the insurance will pay the rental income that the homeowner loses.
Coverage lasts only for the shortest time necessary to repair or replace the premises, and the insurer will reduce the payments by the amounts of non-continuing expenses.
Civil authority prohibits use
Sometimes the government will require people to evacuate their homes due to a man-made or natural disaster, such as a wildfire. If the authorities require occupants in a neighborhood to evacuate, the homeowners will obviously have to find accommodation elsewhere and incur expenses.
In cases like these, the families could benefit from civil authority prohibits use coverage.
This insurance pays for the increased cost of living elsewhere for up to two weeks when civil authorities prohibit homeowners from using their residences because of direct damage to neighboring premises caused by a covered peril.
As in the case of additional living expense coverage, the insurer will only pay the amount above non-continuing expenses – and only the cost of maintaining the family’s normal living standard.
If you have any questions about how loss-of-use coverage works, feel free to give us a call.Le