Your Loss of Use coverage may not be what it is cracked up to be. Loss of Use coverage is typically 20% or 30% of the amount of coverage that you have on your dwelling. So, if your house is insured for $100,000.00, your Loss of Use coverage would be $20,000.00 (20%) or $30,000.00 (30%). This is the amount of money that your insurance company would make available to you to rent another house or apartment while your house is being repaired and you continue to make your mortgage payment.
Here is the catch, most companies put a time limit on how long they will pay Loss of Use. For example, Allstate will only pay Loss of Use for 12 months. Safeco will pay Loss of Use for 24 months. Travelers does not have a time limitation. Going back to our example above, if your company gives you $30,000.00 of Loss of Use coverage for a house that has been insured for $100,000.00 and you are insured by Allstate you may never be able to realize the amount of coverage that their policy gives you.
Let’s say you rent an apartment for your family and it costs $1,500.00 a month. And let’s say that you need to rent it for a full year while your house is being repaired. Twelve months times $1,500.00/month is $18,000.00. You never get to use the full $30,000.00, coverage that you have paid for. Now, let’s look at it another way. Suppose it takes a year and a half to repair or rebuild your house after it burns down. Allstate will only pay Loss of Use for 12 months. It doesn’t matter that there is an addition $12,000.00 left of your Loss of Use coverage, the company is going to stop paying after 12 months. For the last six months you will be paying both your mortgage payment and your apartment’s rental payment. This could be a problem if you do not have the money saved.
It pays to know how your homeowners insurance policy will pay after a loss. You may not have as much coverage as you think you might have.
This article(s) represents the views and opinions of Garrett Parkinson and not the Insurance Companies that he represents or illustrates in his articles.