What Is Additional Living Expenses Homeowners Insurance?

Coverage D, also called loss of use coverage, is one of the six major homeowners insurance coverage policies. This type of home insurance will insure you against any additional living expenses you incur as a result of losses not covered by coverage A, B and C homeowners insurance policies.

You can therefore think of this type of insurance as having an extra safety net by insuring you against losses your other policies leave you exposed to.

In the insurance industry the losses that your existing policies do not cover you against are called “gaps”, and most insurance advisers will work with you to help you close those gaps, as the more gaps you have in your existing policies, the more uninsured financial risk you will be exposed to.

Of course, you may not want to close all and every gap that you find, because doing so could very well turn out to be prohibitively expensive, and therefore, most people cannot afford to do this.

However, there will always be some gaps that present a greater uninsured financial risk than others, and it these gaps that you should work on closing first because they represent the greatest threat to you and your financial security.

Coverage D is a policy which helps you to close such gaps, and in this article, we will discuss what it does for you and how you can benefit from being insured by it.

To find out more information about the other major homeowners insurance policies, please see the following articles:

Coverage A (Dwelling) Homeowners Insurance
Coverage B (Other Structures) Homeowners Insurance
Coverage C (Personal Property) Homeowners Insurance
Coverage E (Personal Liability) Homeowners Insurance
Coverage F (Medical Payments) Homeowners Insurance

You can also view these video which discuss some general home insurance tips.

Insuring Your Home With A Coverage D Policy

If your home is completely destroyed in an accident, such as a fire, or due to some natural disaster such as a hurricane or flooding, and you need to live somewhere else until you can rebuild or repair your home, coverage D homeowners insurance will provide you with such coverage until you are able to get back on your feet.

For example, you may have to live in a hotel room temporarily and eat meals in a restaurant or order takeaway food. You may even need to seek psychological counselling as a result of what has happened to you or your family.

You won’t however, have to pay for utility bills or grocery bills. So whilst some of your expenses may go up, others will go down. The difference between these two expenses is classified as your additional living expenses and will be covered by your coverage D homeowners insurance policy agreement.

Of course, how much you claim on this policy will really depend on how badly your home was damaged, how much your lifestyle has to change as a result of that damage and the size of your family.

In general, the greater the damage and the larger the family, the more you are likely to need to claim on a coverage D policy.

However, as discussed shortly below, you will not be able to claim your expenses indefinitely, as most insurance companies will set either a financial or time limit on the length of an allowable claim.

In some cases, you may be able to extend this limit (for additional cost), although if you are not able to extend it, then you might want to consider saving up an emergency fund that will provide you with money during the times when need it the most.

Home Insurance For Additional Living Expenses

It is important to note that coverage D homeowners insurance only pays your additional living expenses and not your total expenses.

You will therefore, only be compensated for additional expenses you incur as a result of living somewhere else, such as in a rented accommodation, and having to buy food and support yourself as a result of a covered loss that has forced you to temporarily live somewhere else.

In other words, any of your normal everyday expenses will not be insured against. Those expenses however, may be covered under other policies that you have.

In order to benefit from coverage D protection, you should keep a detailed record of all your additional expenses along with all receipts.

Some of these additional living expenses may include:

• Eating out or ordering in food.
• Paying for rental accommodation / hotel rooms.
• Paying for public transportation.
• Any counselling services you or your family receive.
• Purchasing additional emergency clothing.
• Additional fuel charges you incur.

As you can see, if you are forced to vacate your home you will incur some additional expenses that you would not have had to pay for under normal circumstances, and it is exactly these types of expenses that you want to document so that you can receive monetary compensation for them.

It may also help if you can record down a reason for why you incurred those expenses, as this will help to make things easier for you later on should you be required to justify or explain certain expenses.

However, providing that you can prove that your expenses were in fact additional living expenses, then you should have no problem when it comes to claiming on your insurance policy.

How Long Are You Insured For?

Generally, most coverage D homeowners insurance policies will pay for additional living expenses up to your policy limit, or for up to 12 months, whichever is used first.

Some insurance companies however, will provide you with unlimited coverage, while others will pay you a percentage of your coverage A building limit.

If you have a policy limit arrangement, then this will usually be a total of 20% of your coverage A (dwellings) homeowners insurance policy. So if you have a policy for $200,000, then your additional living expenses limit will be $40,000.

In the majority of cases, the policy limit should be enough to cover your additional living expenses while you rebuild your home. If however, you think that you will require additional compensation, it is possible to purchase higher limits on your home insurance policy.

How high you should go with your limits is a difficult question to answer, because it can vary depending on many different factors.

Having a very high limit is obviously the best option to go for because it will provide you with the most amount of uninsured loss protection, thereby greatly minimizing the financial risk that you are exposed to.

However, you may not need such a high limit, especially if you do not have children or your home is not that badly damaged. Having a high coverage limit on your insurance policy will also mean higher costs to maintain that policy, which is not something that everyone can afford.

From a financial perspective, the best length for your policy would be the total length that you are living at another location that is not your home. This of course, you are unlikely to be able to predict and is something which can be delayed such as by an ongoing investigation of what caused the damage or destruction of your home.

As a result, it is best to take out a policy that you can afford and one which you think will be sufficient to cover you and your families expenses because this is a type of policy that you will be able to maintain for the long-term.

For the vast majority of people, a 12 month policy should be more than adequate, and if you have money saved up in the bank, then you may even want to consider taking out a shorter coverage plan as you could use your own money to help you recover rather than solely relying upon your insurance.