Mobile homes surrounded by floodwaters after Hurricane Milton made landfall, in St. Petersburg, Florida, US on October 10, 2024.
Octavio Jones | Reuters
If your home becomes temporarily uninhabitable after a natural disaster, a provision in your homeowners or renters insurance policy may help you afford new housing and other living expenses.
Insured wind and flood damage from Hurricane Helen is estimated at up to $17.5 billion, according to CoreLogic, a real estate data site. Insured losses from Hurricane Milton could range from $30 billion to $60 billion, according to Morningstar DBRS.
Homeowners and renters affected by a natural disaster can ask for so-called “loss of use” or “additional living expenses” coverage from their insurance companies, experts say.
This allowance is intended to help cover reasonable living expenses if your home is unsuitable to live in as a result of a covered peril such as a hurricane, fire, or burst pipe.
“I don't know of any homeowners insurance policy that doesn't already exist,” said Carl Sussman, president and lead underwriter of Sussman Insurance Services in Los Angeles.
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While filing a claim, it will be important to ask your insurer about loss of use coverage and how quickly you can start it, said Shannon Martin, a licensed insurance agent and analyst at Bankrate.com.
“If you contact your carrier, they may be able to speed up the process of filing loss of use claims and issue a check early so you're not stuck trying to figure out how to pay for separate housing,” she said.
Here's what the coverage is and what you should consider before using it, according to experts.
How does loss of use coverage work?
Loss of use coverage is a provision typically included in a homeowner's insurance policy. Experts say it's usually about 20% of the dwelling's coverage and is paid out in the event the home becomes uninhabitable and the policyholder needs money to cover living expenses while the home is repaired or rebuilt. Eligible expenses may include a hotel or rental home, food, pet boarding or storage fees, among others.
For example, if you insure a home for $100,000, and that's what it costs to rebuild the house, that's considered homestead coverage, Sussman said.
“Then the policy will automatically come with $20,000 loss of use coverage,” he said.
“This way you and your family can pay for your hotel and pay for food, because you may be separated from your home for a long period of time,” Martin said.
Renters insurance usually has a similar provision, as do condo policies, Sussman said.
For renters and apartment insurance, the primary coverage is not the dwelling because you're insuring the personal property, not the building, he said. You'll typically get 20% of your personal property coverage in the event of a loss of use, he said.
Ask your insurance company about any policy limitations. There may be expense caps or time limits for claiming loss of use coverage.
“It is not intended to be a long-term solution.”
Loss of use coverage can help homeowners cover living expenses after a natural disaster. However, experts say these funds are intended to be a short-term solution.
“It's generally not intended to be a long-term solution,” said Jeremy Porter, head of climate impacts research at the First Street Foundation, an organization focused on financial modeling of climate risks in New York City. “The money is generally not enough to move people for a long period of time.”
That can be a problem, Sussman said, because the cost of moving will be very different after a major disaster compared to normal times, when there is often less housing available and hotels may raise their rates amid demand.
Although the coverage is intended to be temporary, repairs and broader financial recovery take a long time after major disasters, experts say.
“It takes a long time to heal and recover,” said Loretta Worters, a spokeswoman for the Insurance Information Institute.
Remember, you can file a claim on your policy and get help from FEMA at the same time, Sussman said.
You may be able to use money from the government to help you stay in a hotel for a month, then get a place closer to home and use loss-of-use coverage to pay the difference, Martin said.
