Mobile homes surrounded by floodwaters after Hurricane Milton made landfall, in St. Petersburg, Florida, USA, October 10, 2024.
Octavio Jones | Reuters
If your home is temporarily uninhabitable after a natural disaster, a provision in your homeowner's or renter's insurance can help you pay for new housing and other living expenses.
Insured wind and flood losses from Hurricane Helene are estimated to be up to $17.5 billion, according to CoreLogic, a real estate data website. According to Morningstar DBRS, insured losses from Hurricane Milton could range from $30 billion to $60 billion.
Homeowners and renters affected by a natural disaster can apply to their insurers for so-called “loss of use” or “additional cost of living” coverage, experts say.
The provision is intended to help cover reasonable living expenses if your home is unsuitable for habitation due to a covered peril such as a hurricane, fire, or burst pipe.
“I don’t know of a homeowner’s policy that doesn’t already exist,” said Karl Susman, president and chief insurance agent of Susman Insurance Services, Inc. in Los Angeles.
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“When making a claim, it is important to ask your insurance company about loss of use coverage and how quickly it can go into effect,” said Shannon Martin, a licensed insurance agent and analyst at Bankrate.com.
“If you call your cell phone provider, they may be able to expedite the loss of use claim filing process for you and issue a check early so you don't have to figure out how to pay for separate accommodation,” she said.
Here's how much coverage it has and what experts say you should consider before using it.
This is how loss of use insurance works
Loss of use insurance is a provision usually included in your home insurance policy. This amount is typically about 20% of home insurance and is paid out in the event the home becomes uninhabitable and a policyholder needs funds to live on while the home is being repaired or remodeled, experts say. Eligible expenses may include, but are not limited to, the cost of a hotel or rental apartment, groceries, pet boarding, or pet storage.
For example, if you insure a home for $100,000 and that's what it costs to rebuild the home, that counts as home insurance, Susman said.
“Then the policy would automatically include $20,000 in coverage for loss of use,” he said.
“This will allow you and your family to pay for your hotel and food as you may be away from home for an extended period of time,” Martin said.
According to Susman, renters insurance typically has a similar policy to condo insurance.
When insuring renters and condos, the primary coverage is not the apartment because you are insuring personal property and not the building, he said. Typically, you'll get 20% of personal property coverage for loss of use, he said.
Check with your insurer about any insurance restrictions. There may be expense-specific caps or deadlines for claiming loss of use insurance.
“It is not intended as a long-term solution”
Loss of use insurance can help homeowners cover living expenses after a natural disaster. However, the money is intended to be a short-term solution, experts say.
“It's generally not intended to be a long-term solution,” said Jeremy Porter, director of climate impact research at the First Street Foundation, an organization focused on financial modeling of climate risks in New York City. “There is generally not enough money to support people for a long period of time.”
That can be a problem because the cost of moving out after a major disaster would be much different than in more typical times, Susman said, as there is often less housing available and hotels may increase their prices due to demand.
Although the coverage is intended to be temporary, repairs and overall financial recovery after major disasters take a long time, experts say.
“It takes a long time to recover and recover,” said Loretta Worters, a spokeswoman for the Insurance Information Institute.
“Remember that you can file a claim on your policy and receive assistance from the Federal Emergency Management Agency at the same time,” Susman said.
You might be able to use government funds to stay in a hotel for a month, then find somewhere close to home and use your loss of use insurance to cover the difference, Martin said.