Mobile homes surrounded by floodwaters after Hurricane Milton made landfall in St. Petersburg, Florida, USA on October 10, 2024.
Octavio Jones | Reuters
If your home is temporarily uninhabitable after a natural disaster, a provision in your homeowners or renters insurance policy can help you with new accommodation and other living expenses.
Insured wind and flood losses from Hurricane Helene are estimated at $17.5 billion. according to to CoreLogic, a real estate data site. Insured losses from Hurricane Milton can range from 30 to 60 billion dollarsper Morningstar DBRS.
Homeowners and renters affected by a natural disaster can ask about so-called “loss of use” or “additional living expenses” coverage from their insurance providers, experts say.
The provision is intended to help cover reasonable living expenses if your home is uninhabitable as a result of a covered peril such as a hurricane, fire or pipe burst.
“I don’t know of any homeowner’s policy that doesn’t already have it in there,” said Karl Susman, president and principal underwriter of Susman Insurance Services, Inc. in Los Angeles.
More from Personal Finance:
Basic steps for filing a claim after a natural disaster
What you need to know before hiring a “questionable” contractor
Climate change could cost nearly $500,000
As you file a claim, it will be important to ask your insurance company about loss of use coverage and how soon it can kick in, said Shannon Martin, a licensed insurance agent and analyst at Bankrate.com.
“If you call your carrier, they may be able to expedite a loss of use claim for you and issue a check early so you’re not stuck trying to figure out how to pay for separate housing,” she said.
See what coverage is and what to consider before using it, according to experts.
How loss of use coverage works
Loss of use coverage is a provision typically included in your homeowners insurance policy. It is usually around 20% of the home cover and is paid in case the home becomes uninhabitable and the insured needs funds for living expenses while the home is repaired or rebuilt, experts say. Eligible expenses may include, but are not limited to, a hotel or rental home, food, boarding or pet storage.
For example, if you insure a home for $100,000 and that’s the cost to rebuild the home, that’s considered homestead coverage, Susman said.
“Then the policy will automatically come with $20,000 loss of use coverage,” he said.
“That way you and your family can pay for your hotel and pay for food, because you might be separated from your home for a long time,” Martin said.
Renters insurance usually has a similar provision, as do condominium contracts, Susman said.
For renters and apartment insurance, the primary coverage isn’t the residence because you’re insuring the personal property, not the building, he said. You’ll typically get 20 percent of your personal property coverage for loss of use, he said.
Ask your insurer about any policy restrictions. There may be dollar caps or time limits for claiming loss of use coverage.
“It’s not meant to be a long-term solution”
Loss of use coverage can help homeowners cover living expenses after a natural disaster. But the money is meant for a short-term fix, experts say.
“It’s generally not meant to be a long-term solution,” said Jeremy Porter, head of climate impact research at the First Street Foundation, an organization focused on financial modeling of climate risk in New York. “There’s generally not enough money to carry people over an extended period of time.”
That can be a problem because moving costs would be much different after a major disaster than during more typical times, Susman said, as there is often less accommodation available and hotels may raise their prices due to demand.
While the coverage is meant to be temporary, repairs and the broader economic recovery take a long time after major disasters, experts say.
“It takes a long time to recover and recover,” said Loretta Worters, a spokeswoman for the Insurance Information Institute.
Remember you can make a claim on your policy and get help from Federal Emergency Management Agency at the same time, Shusman said.
You may be able to use funds from the government to help you stay in a hotel for a month, then find a place closer to home and use loss-of-use coverage to pay the difference, Martin said.