On October 10, 2024, mobile homes were surrounded by floods after Hurricane Milton made landfall in St. Petersburg, Florida, USA.
Octavio Jones | Reuters
If your home is temporarily uninhabitable after a natural disaster, a provision in your home or renters insurance policy may help you pay for new accommodation and other living expenses.
Hurricane Helene caused wind and flood damage estimated at $17.5 billion. according to Go to CoreLogic, a real estate information website. Insured losses come from Hurricane Milton The range can be US$30 billion to US$60 billionaccording to Morningstar DBRS.
Experts say homeowners and renters affected by natural disasters can ask their insurance companies about so-called “loss of use” or “additional living expense” coverage.
This provision is designed to help cover reasonable living expenses if your home becomes uninhabitable due to a covered peril, such as a hurricane, fire, or burst pipe.
“I know of no homeowners policy that doesn’t have this provision in it,” said Karl Susman, president and chief insurance agent at Susman Insurance Services, Inc. in Los Angeles.
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when you submit claimShannon Martin, a licensed insurance agent and analyst at Bankrate.com, says that when it comes to using coverage, it’s important to ask your insurance company about loss of use coverage and how quickly coverage kicks in.
“If you call your carrier, they may be able to expedite your loss-of-use claim filing and write a check in advance so you’re not stuck trying to figure out how to pay for a separate home,” she said.
Here’s what’s covered and what you should consider before using one, experts say.
How loss of use coverage works
Loss of use coverage is a provision often included in homeowners insurance policies. Experts say this fee, typically about 20 percent of a home insurance policy, is paid if the home becomes uninhabitable and the policyholder needs funds to cover living expenses while the home is repaired or rebuilt. Qualifying expenses may include things like hotel or rental housing, food, pet boarding or storage fees.
For example, if you buy a home for $100,000 and that’s what it costs to rebuild the home, that’s considered homeowners insurance, Sussman said.
“Then the policy automatically comes with $20,000 in loss of use coverage,” he said.
“This way you and your family can pay for hotels and food because you may be separated from home for an extended period of time,” Martin said.
Sussman said renters insurance often has similar provisions, as does condo insurance.
For renters and condo insurance, the primary coverage is not residential because you are insuring personal property rather than the building, he said. He said you’ll typically receive 20 percent compensation for personal property damage.
Ask your insurance company about any policy limitations. Claims for loss of use coverage may have dollar caps or time limits specific to the cost.
‘This is not a long-term solution’
Loss of use coverage can help homeowners cover living expenses after a natural disaster. However, experts say the funding is only a short-term solution, not a long-term one.
“This is often not a long-term solution,” said Jeremy Porter, director of climate impact research at the First Street Foundation, an organization focused on financial models of climate risk in New York City. “Typically, there’s not enough money to sustain people for a long period of time.”
That can be a problem, Sussman said, because the cost of moving out after a major disaster will be much different than in normal times because there is typically less housing available and there may be fewer hotels. raise price in demand.
Experts say that while the coverage is temporary, repairs and broader financial recovery after a major disaster take a long time.
“It’s going to take a long time to recover,” said Loretta Worters, a spokesperson for the Insurance Information Institute.
Remember, you can make a claim on your policy and get Federal Emergency Management Agency Meanwhile, Sussman said.
Martin said you might be able to use government funding to help you stay in a hotel for a month, then find a place closer to your home and use your loss-of-use insurance to pay the difference.
