What is loss-of-use insurance?

Property damage can be frustrating and expensive. Fortunately, homeowners or renters insurance can help pay repair costs if your home gets damaged.

But there's one thing home insurance can't do: Speed up time.

Not all repairs are quick, simple fixes. Some incidents, such as a fire, can leave your home uninhabitable until the damage is repaired, which could take days, weeks or even months.

Think about it. If you couldn't live in your house, where would you go? More importantly, how much would it cost … and could you afford it?

That's when you will rely on loss-of-use insurance. This special type of insurance coverage can help carry you through the limbo period between a covered loss and its resolution.

What is loss-of-use insurance and why would you need it?

Loss-of-use coverage is insurance that helps pay for housing and living expenses when you're unable to live in your home after a covered loss. Sometimes called additional living expenses (ALE) insurance or Coverage D, it typically is a standard part of your homeowners or renters insurance policy. Review your own policy to better understand your coverages.

It might not seem like a big deal to stay in a hotel for a couple of days after your kitchen pipes burst. But even basic expenses can add up if you're displaced from your home. Not just the cost of housing and food, but also items like transportation, pet boarding, laundry, moving costs and temporary storage.

This is especially true if the damage to your house is unexpected and severe. Consider a devastating natural disaster. Widespread damage can create a surge in demand for temporary housing and repair and rebuilding services. As a result, not only will the repairs be more expensive, but it may take much longer to get your home back to a livable state.

What does loss-of-use protection cover?

It's important to remember that loss-of-use coverage is only for the extra expenses that arise because you can't live in your house or apartment. Existing expenses like your mortgage, normal groceries, childcare and insurance aren't covered.

Here are some of the additional living expenses that can be reimbursed if you're displaced from your home:

Temporary housing

Whether you're staying in a hotel or need to rent an apartment, loss of use insurance can cover the additional housing costs. Your insurance provider will try to match your housing to your current standard of living. Laundry expenses may also be covered.

Restaurants and groceries

Stuck in a hotel without a kitchen? You'll probably have to eat out more, which is typically more expensive than preparing your own food. Loss of use insurance can cover the increase in spending above your normal food budget. The same is true if your grocery bill goes up because you need to replace food that spoiled in the incident.

Transportation

If your temporary housing situation increases transportation expenses such as gas, parking and public transit, those costs may be reimbursed with loss of use coverage.

Moving and storage

Depending on the extent of damage to your property, you may need to move or store your possessions until you can return to your home. Loss of use insurance can help cover those costs.

Pet boarding

Finding pet-friendly hotels and rental housing can be a challenge. If your four-legged family members need a different place to stay while you're displaced, loss of use insurance can help pay for a kennel.

What if I decide to move permanently?

In some cases, people choose to permanently relocate rather than repair or rebuild their property after a loss. If you find yourself in this position, loss-of-use coverage can still help pay for your living expenses while you resettle.

Who should get loss-of-use insurance?

If you live near friends or relatives who have ample space to take in visitors for an extended period, you may feel comfortable without it.

But for many people, loss of use insurance provides peace of mind. Even if you're displaced, you'll be able to care for your family and maintain your standard of living without the extra financial burden. And you won't have to worry about being trapped in your in-laws' basement for a month.

While nobody wants to get stuck in housing limbo, loss-of-use coverage can make the wait and transition much more comfortable.