Renters insurance is financial protection against the possibility that you’ll get robbed or your belongings will be destroyed or lost in some kind of peril. Renters insurance also covers your liability if someone gets injured in your home.
Sometimes, the peril that destroys your stuff is so devastating that you have to actually leave your home and live somewhere else temporarily. Renters insurance even covers this, under the policy’s loss-of-use provision.
Some perils, like fire or windstorms, can cause your home to become uninhabitable. As long as the peril is covered by your policy, the policy will not only pay out to replace any lost items but also cover your living expenses when you lose the use of your home.
What is loss-of-use renters insurance?
Renters insurance typically comes with a provision that covers part of the expenses you accrue if a covered peril puts you out of your home. Depending on the insurer, it may also be called “additional expenses” or “relocation expenses” coverage.
Your loss-of-use coverage is spelled out in your policy’s declarations sheet, which should be attached to the front page of the policy. The dec sheet describes how much coverage you’ve purchased in each area of your renters insurance coverage.
The carrier is only obligated to pay up to the maximum written on your policy declarations page. Even if you’re still in the process of resettling or repairing a loss, you won’t receive any more money if you’ve already reached the maximum. If you need more coverage, you need to pay a higher premium.
There are three main types of provisions under your renters insurance policy’s loss-of-use coverage. Typically, these are:
Additional living expense
This part of loss-of-use coverage pays any expenses you incur when you have to relocate from your home because of a covered peril. The coverage is not for your normal, everyday expenses, but for expenses you make in excess of your usual spending. Some common additional living expenses include:
Paying for a hotel, motel, sublet, Airbnb, and so on,
The extra amount of gas you need to commute from your temporary location,
A credit check associated with renting new accommodations,
Paying more for meals than usual, like if you usually cook but now have to dine out.
The renters insurance policy aims to restore you to your “normal standard of living.” If you currently have renters insurance for your tiny one-bedroom apartment, the insurer won’t pay to temporarily relocate you to a beachside mansion in Miami, but they will be happy to put you up in another tiny one-bedroom apartment.
The renters insurance company will pay additional living expenses for a limited time, predetermined by your policy. Usually this time is the shortest of the following:
A certain number of months (often 12 or 24);
The time you need to repair or replace the damage;
The time you need to permanently resettle somewhere else.
Fair rental value
If you’re subletting out a room in your rented home, you can even get reimbursed for the loss of your rental income if a covered peril forces your tenant to move out. For example, if you have someone renting a room for $400 per month, you’ll be paid $400 per month by the renters insurance company while your loss-of-use coverage continues.
However, keep in mind that the amount will be reduced by the expenses you covered before the loss that do not continue, such as if you paid for the tenant’s utilities. As with additional living expenses coverage, fair rental value coverage is limited by a time frame stated in your policy:
A certain number of months, usually 12, or
The shortest amount of time you need to repair or replace the damage.
Sometimes the covered peril affects a neighboring house instead, and a civil authority will close off access to your house because of an investigation or because it’s otherwise unsafe for people to access. Renters insurance policies typically provide coverage for this, paying your additional living expenses and fair rental value losses as if the peril had affected you. Prohibited use coverage (also called “civil authority prohibited use”) lasts for two weeks.
What is a covered peril?
Covered perils are anything explicitly stated by the policy that may damage or destroy your belongings and for which the renters insurance company will reimburse you. Covered perils typically include:
Fire and smoke
Wind, windstorms like tornadoes and hurricanes, and hail
Riots, vandalism, theft, civil commotions
If a given peril isn’t listed in your policy, you won’t be able to get a reimbursement for damage it causes. Some common perils that aren’t covered are:
Floods, unless you buy a flood endorsement
Earthquakes, mudslides, and other earth movements, unless you buy a specially designed policy.
You can also get an all-risk policy, which doesn’t limit you to the covered perils beyond what’s stated in this exclusions section. But all-risk policies are more expensive. Policygenius can help you compare renters insurance quotes online until you find one that fits your needs and still fits into your budget.