Loss of use coverage: how additional living expenses get paid

Mostly, yes. Loss of use is the name of the whole coverage, often listed as Coverage D. Additional living expenses, or ALE, is the biggest part of it. In the standard policy form, Coverage D has three parts that share one limit:

Your insurer may word these differently, so check your own policy.

It starts when damage from a covered cause makes your home, or the part you live in, not fit to live in. A home with no working kitchen or bathroom, or heavy smoke inside, may qualify. Ask your insurer before you move out if you can, and confirm their answer by email.

Three cases often surprise people:

• Flood. Homeowners policies exclude flood, so they usually don’t pay ALE for flood damage. Standard flood insurance doesn’t pay for temporary housing either. Our flood claim guide covers other help.
• Evacuation orders. The civil authority part usually needs covered damage to nearby property. A warning issued before a storm arrives may not qualify, so ask.
• Uncovered causes. If the damage isn’t covered, the loss of use isn’t covered either.

It pays the extra cost you have because you can’t live at home. It doesn’t pay your normal bills. The standard form promises enough for your household to keep its normal standard of living, not more.

What it usually doesn’t pay: your mortgage, property taxes, insurance premiums and normal bills you would pay anyway. The standard form also excludes the cost of canceling a lease. Ask your insurer for a written list of what it will pay. In California, insurers must provide one on request.

Your insurer compares your costs now with your normal costs. Here’s how it might look for one month, using example numbers only:

The mortgage isn’t repaid, because you would pay it anyway. If a bill drops while you’re away, such as utilities at the empty house, the insurer may subtract the savings. Use bank statements to write down your normal monthly costs now.

Look for Coverage D on your declarations page. Many policies set it as a percentage of your dwelling limit. The NAIC lists 20% as typical, and the Texas Department of Insurance says ALE might be limited to 10% to 20% of dwelling coverage. The Insurance Information Institute notes that some policies instead pay your costs for a limited time with no dollar cap.

With example numbers, a home with a $300,000 dwelling limit and a 20% loss of use limit has $60,000 for living costs. That money is separate from your dwelling coverage, which pays to fix the house.

Divide your limit by your expected monthly ALE to see how many months it covers. Rebuilds after big disasters often take longer than people expect.

In the standard form, ALE lasts for the shortest time needed to repair or replace the damage. If you decide to move for good, it lasts for the shortest time needed to settle in a new home. It isn’t cut off just because the policy expires. Your dollar limit, or a time limit in your policy, can still end it sooner.

Some states add protections after declared disasters. In California, for a covered loss tied to a state of emergency, ALE must last at least 24 months, subject to other policy terms. If you act in good faith, insurers must extend it up to 12 more months for delays beyond your control, like permit backlogs or contractor shortages. For a total loss, you can request an advance of at least four months of ALE. Check your state’s rules on our help by state page.

Often, yes. Your extra costs still count, such as more driving, more food and laundry. Some insurers will also pay a fair amount you give your host for rent. Before you move in:

• Ask your adjuster in writing what they will pay for a stay with family.
• Put a simple written rent agreement in place with your host.
• Pay by check or bank transfer, not cash, so there’s a record.

Some insurers offer one payment, sometimes called a cash-out, instead of paying receipts monthly. It means less paperwork, but it can end your ALE before your home is ready.

Before you agree, ask in writing:

• How many months the payment is meant to cover, and how they figured it.
• Whether accepting it closes your ALE claim for good.
• What happens if repairs take longer than planned.

Read anything you sign. If the amount is large or the terms are unclear, consider talking to a licensed attorney or public adjuster in your state.

Your policy asks you to support ALE with receipts. The standard form lists them among the records you may need for a sworn proof of loss. A simple log does most of the work:

Agree with your adjuster on a schedule, such as every two weeks or monthly. Photograph receipts the day you get them, and track how much of your limit is left. Our free claim checklist lists the ALE questions to ask your insurer early. The course toolkit adds a full ALE tracker, so join the early-access list to hear when it opens.

The IRS says ALE payments for your main home are generally not taxable up to the temporary increase in your living costs. Any amount above that increase is taxable, unless the disaster happened in a federally declared disaster area. Ask a tax professional about your situation.

If your insurance payment is slow, other help may exist. After a federally declared disaster, FEMA may consider rental help when an insurance settlement is delayed 30 days or more through no fault of your own, according to the Louisiana Department of Insurance. You repay FEMA once insurance pays. Homeowners insurance, flood insurance and FEMA aid are separate systems with their own rules, so keep a file for each. Our fire damage claim guide shows how ALE fits with the house and contents parts of a large claim.