Understanding Loss of Use. An Important Part of Your Home Insurance
If you can’t use your property after damage in an insured loss, loss of use coverage offers you valuable protection.
When you suddenly lose the use of your property after a disaster, it can be just that much more disorienting. Fortunately, included in your home insurance policy, there is Loss of Use coverage to help get you by. It offers valuable protection when you lose the use of your property after damage and an insured loss. It’s a common component of most home, condo, and tenant insurance policies.
Essentially, Loss of Use covers you when you find yourself suddenly displaced and cannot live in your home due to an insured incident. It’s coverage that reimburses you for additional expenses when you can’t use your property. For instance, if you need to live elsewhere temporarily during home repairs or rebuild after a house fire.
Components of Loss of Use coverage
You may hear Loss of Use referred to as “Additional Living Expenses” (ALE). It’s the most common use of the coverage but is really only one facet of Loss of Use coverage. There are two other elements to the typical Loss of Use coverage:
Additional Living Expenses (ALE)
If your home is unfit to live in after a catastrophe, ALE covers the additional necessary living expenses you have to pay to relocate temporarily.
Generally speaking, there are two primary circumstances where Additional Living Expenses coverage applies:
- Direct damage. As mentioned, the most common implementation of ALE is to cover living expenses in the event that your home is suddenly unfit to live in due to insurable damage. For the coverage to apply, the damage results from a peril that your policy covers. For example, fire is a peril included in every home insurance policy. In the event of fire damage, your policy will cover repairs, rebuilding, and your living expenses while you cannot live at home. Pests, on the other hand, are a peril not included in most policies. If termites damage your home and you have to leave during fumigation, it’s not likely that your policy will cover – the termite damage or any ALE.
- Civil authority order. It’s possible to have to vacate your home under a civil authority order. ALE coverage applies so long as the cause for evacuation is insurable under your policy. For instance, ALE will cover your expenses if you have to evacuate due to wildfire if your insurance covers fire. Even if the fire doesn’t touch your property, you can claim ALE. But, if there is a civil authority order to vacate your premises due to flood and you don’t have flood coverage, you cannot make a claim for any ALE. To cover costs under ALE, the evacuation order must be an order, not an alert or advisory, or if you choose to leave your home voluntarily.
The common extra expenses Loss of Use protection can help cover:
- A place to live – ALE coverage will pay for a hotel or to rent a furnished apartment. If you’re a renter, ALE will cover only those costs that exceed your normal rent payment.
- Storage – If you need to store items while your home is repaired or rebuilt, ALE can cover the storage costs.
- Extra utility charges – There are typically extra charges when you move, suspend, or cancel utility services. ALE can cover some of the extra costs.
- Food – Food costs often increase when you can’t be at home. Staying in a hotel without a kitchen and eating in restaurants adds up!
- Additional Transportation expenses – A temporary living situation may require additional commuting and travel, making getting to work and school much more expensive. ALE can help cover these increased expenses.
- Pet – Your temporary living circumstances may not allow for your pets. ALE will cover keeping your furry family members in a kennel.
IMPORTANT NOTE: If your situation requires you to make a claim, be sure to keep all of your receipts!
Fair Rental Value
Fair Rental Value is a component of Loss of Use coverage. If you rent all or a portion of your home, you will likely lose rental income if property damage makes the home unliveable – under repair or rebuild. There are policies that will cover lost rental income as part of ALE coverage.
Note: While Fair Rental Value offers coverage for lost rental income in the event of an insured incident, it is not standard coverage on home policies.
For landlords, you have the option to purchase insurance that has rental income coverage included.
If you must evacuate your home, but there isn’t yet a loss or even the direct threat of loss, Prohibited Access helps cover any expenses you might incur. For instance, if there’s a nearby wildfire that requires your neighbourhood to relocate or if your neighbour experiences insured damage, putting your home at risk, you are required to leave. Prohibited Access coverage will reimburse any additional living expenses you incur during the time you can’t be in your home.
What Loss of Use doesn’t cover
The easiest way to define Loss of Use or ALE is to consider only the additional costs you wouldn’t incur but in the event you get evacuated from your home. Remember that you are responsible to pay for everything you paid before the event and loss occurred. Mortgage or rent and property tax, for instance, are costs that you need to continue paying, even during a period of temporary relocation.
Do you have questions about your coverage in the event of a crisis? TALK TO US!!
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