Loss of use

Loss of use is the part of a home, condo or renters policy that pays when a covered loss, such as a fire or water damage, leaves the place unfit to live in. The payment is usually the increase over what you normally spend, so your mortgage and everyday costs stay yours to pay. On a car claim, the same words mean something different: the reasonable value of being without the vehicle while it is repaired or replaced.

How a loss-of-use payment is worked out

Say a covered fire makes a home uninhabitable for 30 days. Before the fire, the household spent $1,800 a month on housing and $600 on food. During the 30 days, it paid $3,600 for a hotel, $1,050 for restaurant meals and $350 for extra transportation. The NAIC (opens in a new tab) and the Connecticut Insurance Department (opens in a new tab) both describe the payment as the difference between normal and temporary costs.

If the Coverage D limit is $20,000, the $2,600 sits well under it. A lower limit, a time limit, a sublimit or an exclusion can make the payout smaller. These amounts are an illustration, not an average or a quote.

Limits and variations that change the payout

• Dollar limit. Some policies state a fixed Coverage D amount on the declarations page, according to the NAIC.
• Percentage limit. The California Department of Insurance (opens in a new tab) describes loss of use as generally limited to 20% of dwelling coverage, while some insurers set no dollar maximum and limit the payment period instead. That is a California description, not a nationwide rule.
• Time limit. A policy can limit payment by dollars, time or both. Under the ISO HO-00-03 form, as described in a Texas Department of Insurance order (opens in a new tab), payment lasts for the shortest time needed to repair or replace the damage, or to settle elsewhere after a permanent move.
• Civil authority. The same form limits qualifying civil-authority benefits to no more than two weeks.
• Fair rental value. This addresses rent lost from an uninhabitable rented portion, usually reduced by expenses that stop.
• Endorsements. An insurer may offer a higher limit or a longer period by endorsement, and the premium effect depends on its filed form and rating plan.

Where you will see loss of use

Home, condo and renters policies commonly place it under Coverage D. The declarations page may label it "Loss of Use," "Coverage D," "Additional Living Expense," "ALE" or "Fair Rental Value," and the details sit in the coverage form, limits, exclusions and endorsements. You will meet it in a quote, a renewal packet, a claim letter or an adjuster's message. For renters, the Connecticut renters insurance guide and the guide to how much renters insurance you need cover the policy around it, and the Connecticut homeowners insurance guide does the same for owners.

Auto policies may offer rental reimbursement or transportation-expense coverage as optional physical-damage coverage. "Loss of rents" and "rent loss" usually mean the rent or rental value lost on a covered rental property, and the exact form decides the label. Business income or business interruption is a separate coverage for income lost during a covered shutdown.

What Connecticut and New York add for auto claims

Connecticut defines auto loss of use in Regulations of Connecticut State Agencies § 38a-10-2(f) (opens in a new tab) as the reasonable value of the claimant's deprivation of the vehicle during the period reasonably needed to repair or replace it, whether or not the claimant paid for a rental. A $65 reasonable daily value over 12 repair days would come to $65 × 12 = $780, subject to liability, coverage and reasonableness. Connecticut Insurance Department Bulletin CL-1-07 (opens in a new tab) adds that the rule does not apply when there is no liability for the property damage, when there is no actual loss of use, or when the claimant accepts an equivalent rental vehicle.

For homes, the Connecticut Insurance Department describes ALE as policy coverage with stated limits, so the policy sets the number. In New York, Insurance Law § 2335 (opens in a new tab) and DFS Circular Letter No. 11 (2018) (opens in a new tab) bar insurers from counting loss-of-use costs, such as rental-vehicle costs, toward the $2,000 property-damage threshold for a minor-accident surcharge. That rule concerns surcharges, and the policy and claim facts still decide the payment.

Questions to ask your agent or insurer

1. What is my loss-of-use limit, and is it a dollar amount, a percentage of dwelling coverage, a time limit or more than one? The limit sets the most the policy can pay.
2. Does the policy pay only the increase over my normal living expenses, and which expenses count? ALE covers the added amount, not ordinary costs.
3. What makes the home uninhabitable for this coverage, and must the loss be covered under the property section? Coverage depends on a covered loss that stops you from living there.
4. Do I need approval, receipts, repair estimates or proof of fair rental value before I spend? Keep hotel, meal, transportation and storage receipts.
5. On my auto policy, is rental reimbursement the only benefit, or can a third-party claim use a reasonable vehicle value without a rental? Policy benefits and liability damages are different things.

Frequently asked questions

These answers cover common follow-up questions about the coverage.

Is loss of use the same as additional living expense?

In home insurance, loss of use is commonly the broader Coverage D category, and additional living expense is the part that pays for the higher cost of living elsewhere. Fair rental value and civil-authority coverage can sit in the same section, according to the California Department of Insurance (opens in a new tab).

Does renters insurance include loss of use?

Many renters policies include loss-of-use or ALE coverage when a covered loss makes the rented residence uninhabitable, according to the Connecticut Insurance Department (opens in a new tab). The limit and covered expenses appear on your declarations page and in the coverage form.

Does a power outage or evacuation trigger loss of use?

Standard homeowners coverage requires a covered loss that damages the residence and makes it uninhabitable, according to the Connecticut Insurance Department (opens in a new tab), so a power outage alone does not qualify unless your policy provides otherwise. Ask your insurer what your policy says.

Do I need to rent a hotel or car to collect loss-of-use money?

For home ALE, actual additional expenses and their receipts matter. For Connecticut auto claims, the regulation measures the reasonable value of the deprivation even when the claimant never rented a vehicle.