Last Updated May 2025
When a fire, leak or other insurance-covered event means you have to move out of your home temporarily, loss of use coverage helps cover extra living expenses — a hotel or short-term rental, restaurants, transportation.
Typically, it’s a standard part of a homeowners, condo or renters insurance policy. It pays costs above what you would normally spend. If you’re a homeowner, you’d have to keep paying your mortgage, and your loss of use coverage could foot the full bill for your hotel or rental. If you’re eating out because you can’t use your own kitchen, and your normal grocery bill totals $800 a month but your restaurant meals add up to $1,200, your coverage could reimburse you for the extra $400 each month that you’re out of your home.
Understanding loss of use coverage
Loss of use coverage can help with a wide range of added costs if you’re displaced by damage to your house, condo or rental unit. Costs can add up quickly if you’re paying for a new living space, you can’t cook your meals, your pets need to be boarded, you have a longer commute and you have to pay for parking over the months it can take to repair or rebuild after a damaging event. Loss of use coverage can pay for costs that exceed your usual expenses. Typically, you’ll have a separate limit for loss of use coverage and often won’t have to pay a deductible.
Example: If you’re a renter, and your monthly rent is $1,200, but your temporary rental costs $1,500 a month, your coverage could reimburse you for the extra $300 each month.
Loss of use on homeowners insurance
Loss of use coverage on a homeowners insurance policy typically equals 20% of your dwelling coverage, according to the Insurance Information Institute (III). So if you insure your home for $200,000, your loss of use coverage limit would be $40,000. Depending on your insurer, your percentage might be higher. Some insurers limit additional living expenses coverage to costs incurred during a certain amount of time after a covered event. In most cases you can increase the default amount of coverage.
If you rent out part of your house, loss of use coverage can reimburse you for the rent that you would have collected if your home had not been damaged, according to the III.
Loss of use coverage on condo (HO-6) insurance
Condo insurance typically provides loss of use coverage that adds up to 20% of your unit owner’s building coverage and personal property coverage combined. So if you’ve insured your condo for $100,000 and your personal property coverage limit is $30,000, your additional living expenses coverage limit would be $26,000. Different insurers may have different limits, however.
Loss of use coverage on renters (HO-4) insurance
Most renters insurance policies will cover all additional living expenses above what you would ordinarily pay for rent, food and transportation — up to a specified dollar or time limit listed in your policy, according to the III.
What does loss of use coverage include?
This coverage can apply to many kinds of added costs, up to your limit, including:
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But remember, you’re responsible for paying your normal costs. Loss of use coverage helps with added costs, so you’ll need to keep track of both.
Here’s an example of how loss of use coverage typically works:
A fire leaves your home uninhabitable until repairs are made. You let your insurer know and move into a hotel.
You start keeping receipts for your living costs, including your hotel, pet boarding bills, restaurant and grocery receipts, utilities, transportation. But you also keep paying your mortgage, utilities and any ongoing expenses due on your damaged home. For your loss of use claim, you’ll need to document both your normal living expenses and your added costs for living outside your home.
Typically, you’ll be reimbursed for costs that are higher than what you would normally pay, up to your dollar limit or until the clock runs out. As part of your claims process, an insurance adjuster will work with you to determine where loss of use coverage applies and where it doesn’t.
What is not covered by loss of use coverage?
- Your normal monthly expenses, including your mortgage or rent, plus insurance, on your damaged home.
- Costs related to an event that’s not covered by your insurance, like an earthquake or flood, or a problem caused by wear and tear.
- Flooding. Even if you have flood insurance through FEMA’s National Flood Insurance Program, loss of use coverage is not covered by your home policy, according to the III. (It may be included in some private flood policies.)
- Preventable losses, meaning a situation where something you did or didn’t do contributed to the damage — like leaving windows open during a storm.
- Voluntary displacement. If you choose to leave your rental because of a fire or other covered event, but you weren’t required to, your costs may not be covered.
- Illegal activity.
What’s the difference between loss of use coverage and additional living expenses?
The two terms are often used interchangeably, but, actually, additional living expenses (or “ALE”) coverage is part of loss of use coverage. ALE covers your extra costs if you have to move out while your house, condo or rental unit is repaired or rebuilt after a covered event. Loss of use coverage can also cover certain costs that ALE doesn’t, including loss of rents, if you’re renting out part of your home, and what’s called prohibited use, meaning your home isn’t damaged but evacuation orders or other safety authorities won’t let you live there because of events nearby.
The information contained in this page is provided for general informational purposes only. The information is provided by Farmers® and while we endeavor to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to this article or the information, products, services or related graphics, if any, contained in this article for any purpose. The information is not meant as professional or expert advice, and any reliance you place on such information is therefore strictly at your own risk.
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