Here's a scenario most homeowners never think about until it happens: A kitchen fire makes your house unlivable. The damage isn't catastrophic, but between the smoke, the water from firefighters, and the repairs needed, you can't stay there for the next four months. Where do you go? How do you pay for a hotel or temporary apartment? What about all those restaurant meals since you don't have a kitchen?
This is exactly what loss of use coverage is designed for. Also called Additional Living Expenses (ALE) or Coverage D on your homeowners policy, this coverage pays for the extra costs you incur when you're forced to live somewhere else temporarily. It's one of the most valuable—and overlooked—parts of your homeowners insurance.
What Is Loss of Use Coverage?
Loss of use coverage kicks in when your home becomes uninhabitable due to a covered peril—things like fire, windstorm, lightning, vandalism, or burst pipes. If you can't safely live in your home while it's being repaired, this coverage reimburses you for the additional expenses of living elsewhere.
The key word here is "additional." Your policy doesn't give you free housing—it covers the difference between your temporary living costs and what you'd normally spend. For example, if you usually spend $400 per month on groceries but now you're eating at restaurants and spending $700, your policy would cover that extra $300. You're still responsible for your normal $400.
Most homeowners policies automatically include loss of use coverage as part of your standard policy, typically at 20% to 30% of your dwelling coverage. So if your home is insured for $300,000, you'd have between $60,000 and $90,000 available for additional living expenses.
What Expenses Does ALE Coverage Pay For?
Loss of use coverage is more comprehensive than many homeowners realize. Here's what it typically covers:
Temporary housing costs are the big one. Whether you're staying in a hotel during the first few weeks or renting an apartment for several months, your policy covers the expense. Just remember: it doesn't pay for luxury accommodations. If you normally live in a modest three-bedroom house, your insurer won't pay for a penthouse suite. The coverage is meant to maintain your standard of living, not upgrade it.
Increased food costs are covered too. Without your kitchen, you'll probably eat out more than usual. Keep those restaurant receipts—your policy covers the difference between what you're spending now and what you'd normally spend on groceries and dining.
Pet boarding fees count as additional living expenses if your temporary housing doesn't allow pets. Storage unit rentals for your furniture and belongings are covered while your home is being repaired. Extra transportation costs—like additional mileage if your temporary place is farther from work, or public transit costs you wouldn't normally incur—are reimbursable. Even laundry service fees can be covered if your temporary housing lacks the washer and dryer you have at home.
Many policies also extend coverage to mandatory evacuations for natural disasters. If your local government orders an evacuation due to a wildfire, hurricane, or flooding, your ALE coverage can help pay for hotel costs and meals during the evacuation period, even if your home doesn't end up damaged.
What Loss of Use Coverage Doesn't Pay For
Understanding the limitations is just as important as knowing what's covered. Your mortgage or rent payment continues regardless of where you're living, and loss of use coverage won't pay for that. You're still responsible for your regular housing payment.
Your existing utilities, insurance premiums, and property maintenance costs aren't covered either. These are expenses you'd have whether you were displaced or not. The same goes for childcare costs, car payments, and other regular bills.
Also important: ALE coverage only applies to covered perils. If your home becomes unlivable due to an excluded cause—like flood damage without separate flood insurance, or foundation issues from delayed maintenance—you won't have coverage for temporary living expenses.
Understanding Coverage Limits and Time Restrictions
Your policy has two important limits on loss of use coverage: a dollar limit and a time limit. The dollar limit is typically 20% to 30% of your dwelling coverage. If your home is insured for $200,000, you'd have $40,000 to $60,000 available for additional living expenses. That might sound like a lot, but it can go faster than you'd expect.
Let's look at a real example: If you're paying $2,000 per month for a temporary apartment, $600 more per month for food, $150 for storage, and $200 in extra transportation costs, you're spending roughly $2,950 per month in additional expenses. At that rate, a $40,000 limit would last about 13 to 14 months.
Speaking of time, most policies also cap coverage at 12 to 24 months. If your home repairs take longer than your policy's time limit, you'll be on your own for the remaining costs. This is where things can get tricky with major disasters when contractors are overwhelmed and repairs drag on.
If you live in an area prone to natural disasters, or if your home would be expensive to repair (older construction, custom features, remote location), consider increasing your loss of use coverage. Most insurers will let you bump up the percentage for a modest increase in your premium.
How to File an ALE Claim: Practical Advice
Here's the reality of ALE coverage that catches people off guard: you pay upfront and get reimbursed later. When you're checking into a hotel or signing a lease for a temporary apartment, you'll need to cover those costs yourself and then submit receipts to your insurance company for reimbursement.
This makes documentation absolutely critical. Save every receipt—hotel bills, restaurant tabs, pet boarding invoices, storage unit contracts, extra gas receipts, everything. Take photos of receipts in case they fade. Create a simple spreadsheet tracking your expenses with dates, categories, and amounts.
Your insurance adjuster will also ask about your normal expenses for comparison. If possible, gather a few months of bank statements or credit card statements from before the loss showing your typical spending on groceries, dining out, and other relevant categories. This baseline helps prove what's "additional" versus what you'd normally spend.
Stay in regular contact with your insurance company. Submit expense documentation regularly—monthly is usually good—rather than waiting until the end. This helps you get reimbursed faster and lets your insurer track whether you're approaching your coverage limits.
How to Get the Right Coverage for Your Situation
Pull out your homeowners policy and check your Coverage D limit. Do the math: if you had to rent a comparable place and cover all the additional expenses we've discussed, how long would your current limit last? For most people, the standard 20% is adequate. But if you live somewhere with high rental costs, or in a disaster-prone area where repairs might take longer, consider increasing it to 30% or higher.
Also verify the time limit on your policy. If it's only 12 months and you live in an area where major repairs could easily take longer, ask your insurer about extending it to 24 months. The cost increase is usually minimal.
Loss of use coverage is one of those things you hope you'll never need, but if you do need it, you'll be incredibly grateful it's there. Understanding how it works now—before you're dealing with a disaster—means you'll be better prepared to use it effectively if the time comes. And that peace of mind is worth a lot.
