What Does Loss of Use Mean in Home Insurance?

Home insurance in Canada is designed to protect not only the physical structure of your house, but also your financial stability in the event of the unexpected. A lesser-known but highly valuable aspect of a home insurance policy is loss of use coverage, also known as Additional Living Expenses (ALE).

This article examines the concept of loss of use in a Canadian home insurance context, including the types of expenses it may cover, how to determine if your policy includes it, and why it's essential for both homeowners and renters.

What Is Loss of Use in Home Insurance?

Loss of use is a provision in most standard home and renters insurance policies in Canada, typically listed as Coverage D. It covers the extra expenses you might incur if your home becomes temporarily uninhabitable due to a covered event, such as a fire, windstorm, or water damage.

In practice, this coverage is designed to maintain your standard of living while your home is being repaired or rebuilt. If you're unable to live in your home, your insurer may help cover the costs of living elsewhere and any additional expenses that result.

This type of protection goes by several names. In addition to "loss of use," you might hear it referred to as Additional Living Expenses (ALE) or housing displacement coverage.

What Kinds of Expenses Are Covered?

Loss of use coverage focuses on helping you manage costs that go beyond your regular monthly expenses due to a temporary relocation. While policies vary, insurers generally reimburse expenses related to your displacement that are necessary and reasonable.

For example, this might include:

• Temporary housing, such as hotel stays or short-term rentals, if your home is unlivable.

• Increased food costs, especially when you can't cook and rely more on takeout or restaurants.

• Transportation, such as longer commutes or the cost of renting a vehicle if yours was damaged or inaccessible.

• Pet boarding fees, especially if pets can't stay in your temporary housing.

• Storage for personal belongings during repairs or reconstruction.

• Miscellaneous services like laundromats or internet access in temporary housing.

  
  

These aren't flat reimbursements. Your insurer will review your typical spending and cover the difference. So, if you usually spend $200 a week on food and are now spending $350 due to displacement, only the additional $150 may be reimbursable.

According to ThinkInsure, ALE coverage typically includes hotel stays, restaurant meals, moving costs, laundry, rent, travel expenses, pet boarding, storage units, and other living expenses.

How to Check If You Have Loss of Use Coverage

The best way to confirm whether your policy includes loss of use is by reviewing your insurance documents carefully. Start by looking at the declarations page, which is typically the first page of your policy and summarizes your coverage types and limits.

Look for terms like "Coverage D," "additional living expenses," or "fair rental value." These are all indicators that some form of loss of use protection is included.

If you're uncertain, speaking directly with your provider is a good idea. Canadian insurers such as Intact, Aviva, and Wawanesa can clarify your policy details.

Policy Limits and Time Constraints

Loss of use coverage is subject to policy limits. Most insurers calculate this as a percentage of your dwelling coverage, typically ranging from 20% to 30%. So, if your home is insured for $500,000, you might have $100,000 to $150,000 in loss-of-use protection, depending on your specific plan.

There's also usually a time limit on how long benefits are available, even if you haven't used the full amount. Coverage might last up to 12 or 24 months, depending on your insurer and the scope of repairs.

Considering the financial and time limits when assessing whether your current policy offers enough protection is essential. If you live in a high-cost area or anticipate that temporary housing might be expensive, it's worth discussing higher limits with your agent.

Does Renters' Insurance Include Loss of Use?

Yes, renters' insurance typically includes loss of use coverage, although the terms may differ slightly. If you're renting an apartment or home and a covered event (such as a fire or burst pipe) forces you to relocate temporarily, your insurer may help cover your temporary housing and other necessary expenses.

The key difference is that renters don't need coverage for the dwelling itself, so the loss of use mainly applies to additional living expenses. Some renters' policies also include loss of rental income if you're subletting part of your space and are unable to collect rent during the repairs.

For more information on renters' insurance in Canada, visit the Government of Canada's home insurance page.

How to File a Loss of Use Claim

If you need to use your loss of use coverage, the claims process usually begins with notifying your insurer as soon as possible after displacement. From there, the following steps typically apply:

1. Keep detailed records of your expenses: Save all receipts, invoices, and documentation for housing, food, transportation, and other costs.

2. Compare your current expenses to your usual spending: This helps your insurer determine which costs are eligible for reimbursement.

3. Submit the claim through your insurer's online portal or claims representative. Provide all necessary documentation and information.

4. Track the timeline and progress of your claim: Some policies outline when you can expect reimbursement and under what conditions.

   
   

According to YouSet, it's essential to understand the specific terms and conditions of your policy when filing a claim.

Continue reading: How to file a home insurance claim

What Isn't Covered? Common Exclusions

While loss of use offers valuable protection, it's not all-encompassing. Here are some situations where coverage typically doesn't apply:

• Events not covered by your base policy: Like floods or earthquakes—won't qualify unless you have separate coverage.

• Power outages: Unless tied directly to a covered peril, power outages are often excluded.

• Voluntary evacuations: May not be eligible for reimbursement unless a civil authority orders the evacuation due to a covered risk.

  
  

Review the exclusions in your policy and consult your insurer if you have concerns. If needed, consider purchasing additional endorsements to bridge potential gaps.

Tips for Evaluating and Improving Your Loss of Use Coverage

If you're unsure whether your current limits are sufficient, there are a few steps you can take:

• Assess the cost of temporary housing in your area to determine if your coverage would realistically be sufficient.

• Estimate potential additional expenses: Consider food, pet care, transportation, and other costs that may arise during displacement.

• Discuss with your insurance agent: Talk about increasing your Coverage D limit or adding supplemental coverage.

  
  

Providers such as Wawanesa offer tools and resources to help you estimate your needs and adjust your policy accordingly.

Conclusion

Loss of use coverage is a critical component of home and renters insurance policies in Canada. It helps ensure you won't have to shoulder the financial burden of temporary relocation alone if your residence becomes uninhabitable.

Understanding this coverage—what it includes, its limits, and how to file a claim—can make a significant difference when dealing with a home emergency. Take the time to review your current policy, speak with your insurance company if anything is unclear, and make adjustments if your standard of living or living situation has changed.

For more insights into home insurance coverage types, see the Insurance Bureau of Canada's guide or explore tips for choosing the right insurance policy to ensure you're fully protected.