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What is loss of use coverage and what does it cover?
Loss of use coverage is the portion of homeowners insurance that reimburses you for indirect financial losses after a covered disaster. This protection includes three distinct types of coverage:
1. Additional living expenses
If your house is severely damaged by a covered loss and you’re forced to relocate temporarily, additional living expenses (ALE) can help pay for you to maintain your normal standard of living.
Here’s an example.
Say you’re forced to flee to another state due to a raging wildfire. You’re likely going to spend money on fuel, hotel stays, and other necessary living expenses while you’re away from home. This coverage essentially pays the difference between your normal monthly budget for essentials and what you’re having to spend while your house is uninhabitable.
That means if you normally spend $200 a week for food but you’re now having to spend $300 because you’re eating out more, you’d be reimbursed for the $100 additional weekly expense.
Remember that ALE only pays for reasonable expenses — that means if the damaged residence is a $1,600 one-bedroom apartment, your insurer probably won’t pay for you to rent out a luxury one-bedroom penthouse for $3,000 a month.
2. Fair rental value
If a room you normally rent out is damaged by a covered loss and you’re no longer able to collect rent, fair rental value coverage replaces the rent payments you’re not able to collect. Coverage is provided for as long as it takes to repair the damaged portion of the rental property or a maximum of 12 months — whichever comes first.
3. Civil authority prohibited use
If there’s a natural disaster and the government orders you to leave your home and relocate temporarily, your policy will pay for any additional living expenses or fair rental value reimbursements for no more than two weeks.
What can additional living expenses (ALE) pay for?
Your policy should specify the types of expenses you’re able to file a claim for — usually it comes down to whether or not the expense is necessary.
But generally speaking, insurance companies typically cover the following:
Additional fuel or mileage expenses
Additional grocery or restaurant bills
Dry cleaning expenses
When does loss of use coverage kick in?
We break down what types of damage to your home triggers loss of use coverage — and when you'll have to foot additional living expenses yourself.
How much loss of use coverage do I need?
Loss of use coverage is typically set at 20% of your home’s insured value, or your dwelling coverage limit, however coverage limits vary by company. 
Let’s look at an example.
Say your home has $400,000 in dwelling coverage and your ALE limit is set at 20%, then your ALE coverage will be $80,000 maximum. That means if a tornado destroys your home and you need to live somewhere else, you’ll have $80,000 in ALE coverage until either your house is rebuilt or you find a new permanent residence.
How to file a loss of use coverage claim
If you plan on filing a loss of use coverage claim, there are some things you can do to make the process quicker and receive your payment faster.
Hold onto receipts: In order for your insurance company to corroborate your purchases and send you a check, you’ll need proof of the expenses you’re claiming.
Ask about payment options: Your insurance company typically sends you a reimbursement check for your previous month’s expenses. However, if you’re short on cash or your necessary expenses require a large sum of money, your insurer may provide you with a loss of use check up front.
Begin filing your claim: You’ll be instructed to fill out a form detailing what your normal monthly spending looks like in terms of fuel, food, housing, and any other essential living expenses. You’ll likely be asked to submit proof in the form of bank statements or receipts.
Upload receipts: To determine how much you’re owed on the claim, your insurer will need to know how much you’re currently spending on essentials while you’re away from home. Be sure to upload any applicable receipts so you can be reimbursed for any additional living expenses.