Loss of use coverage, or Coverage D, is a valuable component of a home and auto insurance policy, designed to provide financial protection and support to you and your family if you’re unable to stay in your home due to covered perils such as fire, natural disasters, or other unforeseen events.
Also known as additional living expenses (ALE) coverage, loss of use coverage is a crucial asset that can help you maintain your standard of living and cover expenses incurred as a result of being unable to reside in your home. In this article, we’ll cover how to prove loss of use, list tips to help you file a claim, and outline how much loss of use coverage you may need.
How do you prove loss of use?
When you file a loss of use claim, your insurance company will make a determination on whether the additional living expenses you submitted surpass your normal living expenses. Here's how loss of use can be proven for a home insurance claim:
Documentation of Expenses: Keep detailed records of all additional living expenses, such as temporary housing, transportation, pet boarding, and increased food costs.
Fair Rental Value: If you're renting out your home and it becomes unlivable due to a covered loss, you can prove loss of use by demonstrating the fair rental value for the rental income you're missing out on.
Legal Precedents and State Laws: Understanding the legal arguments for loss of use in your jurisdiction is crucial. State laws may vary regarding the requirements for proving loss of use and the types of expenses that can be claimed.
Consultation with Insurance Agent: It's advisable to consult your insurance agent to understand the amount of loss of use coverage you have, as this is subject to coverage terms and limits. Additionally, your agent can provide insights on proving loss of use and filing related claims
While loss of use claim determinations for auto insurance vary from state to state, loss of use claims are typically determined by a three-part formula that calculates the number of days the vehicle was out of service multiplied by the daily rental car rate.
One day is equal to four hours of labor. This represents the average number of hours that a vehicle is worked on per day.
Two weekend days are added for every five repair days. This assumes every repair begins on a Monday.
Three administrative days are allowed to obtain an estimate. This includes taking and retrieving the vehicle to and from the shop.
If the vehicle requires over 30 days to repair, the insured will usually be responsible for transportation costs beyond the 30 days.
Tips for Filing for a Loss of Use Claim
While the process can be different between each carrier, here are some tips for filing a loss of use claim:
Homeowners Claim
You’ll have to detail your “normal living expenses” in which you’ll document how much you typically pay for gas, food, rent, and other applicable expenses each month. This is something you can do before a loss occurs.
Keep all receipts that stem from additional living expenses.
Auto Claim
You’ll want to contact your auto insurance carrier as soon as the accident occurs, and tell them that you’ll need to file for a loss of use claim.
Review your policy’s loss of use coverage to understand how much you can claim per day and what type of vehicle you are allowed to rent.
Take pictures of your damaged vehicle and get quotes from auto repair shops to determine how long your vehicle will have to be in the shop.
Put all of the details and proof in writing so your claim can be processed quickly.
What is loss of use coverage limited to?
The loss of use coverage under your homeowners insurance policy is meant to provide coverage for additional living expenses that have resulted from a covered loss. Loss of use coverage won’t cover expenses you were already responsible for before the loss.
Typically covered under loss of use coverage:
Cost of temporary residence, such as a motel or hotel
Pet boarding
Additional food expenses
Typically isn’t covered under loss of use coverage:
Your mortgage
Child care expenses
Insurance
How much loss of use coverage do you need?
Typically, loss of use coverage for homeowners insurance is around 20% of the dwelling coverage. For example, if your dwelling coverage is $300,000, the loss of use coverage would cap at $60,000.
Instead, loss of use coverage in the context of auto insurance generally refers to coverage for vehicle rental costs if your car is in the shop for repairs due to a covered claim. Auto insurance policies vary, and some may include coverage for car rental expenses in the event of an accident. It's crucial to review your policy to understand the extent of this coverage and any limitations.
Find a Loss of Use Auto and Home Insurance Plan with SelectQuote
Damage to your home or vehicle can bring on a lot of stress both physically and financially. Having sufficient auto and home insurance coverage can provide peace of mind when you need it most. At SelectQuote, we can help find you the right amount of coverage at a price that works for you. In just minutes, our licensed insurance agents can compare rates from several of the nation’s most highly trusted carriers—all in one place.
