Posted In:
MENUMENU
Most people purchase a renters insurance policy to ensure they can replace their belongings if a fire, severe storm, or other incident damages or destroys them. However, what happens when the unthinkable occurs and you can’t stay in your home?
Some landlords will help tenants secure temporary accommodations if the damage is relatively minor and repairable. However, authorities may deem a home uninhabitable if it’s unsafe to stay there or if the damage is so extensive that you cannot reasonably perform your routine tasks. In this case, you’ll need a longer-term solution.
If you have a renters insurance policy, you don’t need to worry about unexpected living expenses putting a huge dent in your emergency savings, scrambling to pay for alternative living arrangements while your home undergoes repairs, or searching for a new place to live. Although policies have limitations, temporary living expenses coverage (also known as loss of use coverage) can help make a stressful situation a little easier.
Take a moment and think about all the ways that a disaster could turn your life upside down. In addition to not having a roof over your head, you won’t have clean clothing, a place to prepare meals, and, in some cases, access to your usual transportation to school or work. If you have pets, you won’t have a safe place for them or a safe location to store your undamaged belongings.
Overcoming these challenges can mean significant out-of-pocket expenses. For example, the national average price to wash and dry a load of laundry at a laundromat is about $4, according to Laundry Solutions Company, while doing it at home is less than $1.50, according to Fabricare Center. That’s a relatively minor necessary living expenditure when you consider the cost of a hotel room or short-term rental and restaurant meals.
When you have a renters insurance policy that covers your daily living costs in the aftermath of a disaster, you can recoup some of the money you have to spend. Covered expenses include:
Loss of use coverage is a standard part of a homeowners insurance policy and usually has a coverage limit of 20% to 30% of the dwelling coverage. Renters insurance works differently. You can select the amount of temporary living expenses coverage you want, in amounts ranging from $1,000 to $100,000.
A good rule of thumb for selecting the coverage amount is to choose an amount that’s at least three times your monthly rent. In other words, if you pay $2,500 a month for rent, you need at least $7,500 in loss of use coverage to adequately cover your everyday expenses.
A common misconception about temporary living expenses coverage is that the insurer will write you a check to reimburse all the expenses you incur while your home is uninhabitable. Policyholders often believe that as long as they spend less than their coverage limit, they can spend as much as they want.
Unfortunately, this isn’t the case, and a disaster in your home doesn’t mean you can spend a few weeks in a luxury hotel. Another name for temporary living expenses coverage is additional living expenses, or ALE. The operative word is additional, meaning the insurance company will only pay your expenses above and beyond what you normally spend on basic living outlays.
For example, you pay $2200 per month for your one-bedroom apartment. If you can’t stay there and must secure a short-term rental that costs $3000 a month, your insurer will reimburse you $800, or the difference between your regular bill and the additional expense. In other words, if your landlord doesn’t require you to continue making rent payments while the place is under repair, you’re still responsible for paying your usual day-to-day costs, with the insurer picking up the tab for the overage.
If your lease contract obligates you to continue paying rent even when you can’t live in your home temporarily, then your insurance will pay for your temporary housing up to the amount of your current rent. Using the same example, if you have to pay your landlord $2200 a month but rent a temporary place for $3000 a month, you’ll pay the extra $800 out of pocket.
Even if your renters insurance policy helps you get back on your feet when your home becomes unlivable, you’re still responsible for your living expenses. You cannot make claims to cover things like:
Basically, if you routinely paid for something before the event that left your home uninhabitable, then you cannot make a claim for it. For example, while you can request reimbursement for restaurant dinners if you typically cook at home but can’t while staying in a hotel, if you usually get lunch from a local sandwich shop during your workday, you can’t claim that cost on the insurance.
The bottom line is that temporary living expense coverage is a stopgap to help you maintain your living standard while recovering from a disaster. It’s not a means to enjoy a five-star vacation or avoid your financial responsibilities, but rather a lifeline to keep your head above water and protect your savings.
To make a claim on your renters insurance to get assistance with basic living outlays, you must be unable to stay in your home due to a covered peril. Covered perils are the specifically named disasters in the policy and usually include damage due to:
Your policy may also allow you to claim additional living expenses even when your home doesn’t sustain significant damage. If you have to leave your home due to a mandatory evacuation, for example, or because an emergency causes prolonged utility outages, the insurer may reimburse your additional expenses.
However, most renters insurance policies do not cover damage and expenses related to floods and earthquakes. Insurers deem these high-risk events since they typically cause widespread catastrophic damage. If you live in an area with an increased risk of these events, consider purchasing an additional flood or earthquake insurance policy to ensure you can replace your items and cover your day-to-day expenses during recovery.
The most critical element of making a successful claim on your temporary living expenses coverage is documenting what you spend. When you submit the claim, the insurer will only pay routine living expenditures you can prove with a receipt. Without a receipt, you will not receive a payment.
Some insurers will provide a cash advance on your expected reimbursement to help you get your feet under you. Even if you can’t get a cash advance, you can submit expenses for reimbursement on a rolling basis and get payments as you go, so you don’t have to wait for a lump sum payment after you return to your home. As long as you have the documentation to support your claim, you should not have trouble getting the money you need.
In 2023 alone, more than 3 million people in the United States had to leave their homes due to a disaster, according to data from the Urban Institute. From fires to extreme storms that brought fierce winds and heavy rain, homes in every state experienced catastrophic damage, forcing their occupants to find alternative arrangements. These disasters were even more devastating for those who didn’t have insurance policies to cover the extra expenses.
Carrying a renters insurance policy with coverage for temporary living expenses provides a cushion against financial hardship in the aftermath of a disaster. The Consumer Financial Protection Bureau reports that a natural disaster can lead to many financial issues, including falling behind on bills and ballooning credit card debt. A renters insurance policy may not cover all your expenses, but it can significantly affect your overall security and financial well-being.
Insurdinary makes it convenient to shop for the right renters coverage for your situation with our online quoting tool. Just answer a few simple questions, and we’ll show you multiple customized quotes from leading insurers to compare. When you find the perfect policy with coverage for living expenses and all your belongings, click to connect with one of our licensed insurance agents and secure coverage in just a few minutes at a rate you can afford.
Do you have more questions about insurance? Get in touch with Insurdinary for the answers you need.