Where Do You Live While Your Home Is Being Repaired? Loss-of-Use Coverage Explained

If a covered loss like a fire makes your home unlivable, most New Jersey homeowners policies pay your additional living expenses under Coverage D, loss of use: the extra cost of living somewhere else, above what you'd normally spend. The state's insurance department says that coverage is usually limited to 20 percent of your dwelling coverage, and you'll need receipts for everything.

I'm Dennis Mark Interdonato with The Dennis Mark Group at Keller Williams Realty Ocean Living. When a house in Monmouth or Ocean County is damaged badly enough that you have to move out, the first question isn't about the roof. It's "where do we sleep tonight, and who pays for it?" Here's how the coverage works, where it stops, and how it fits into the bigger plan for the house.

What does loss-of-use coverage pay for?

The New Jersey Department of Banking and Insurance (DOBI) describes Coverage D in its homeowners guide: if a covered peril, such as a fire, forces you to live elsewhere temporarily, it "provides assistance for additional living costs beyond what you would normally pay, including reasonable hotel costs and additional expenses for meals or laundry."

DOBI's standard homeowners summary puts it another way: loss of use pays "costs over the normal amount for housing, food, and other essential expenses" if you have to move out temporarily because damage from a covered loss "renders it uninhabitable."

The key word is additional. If eating in a hotel costs more than cooking at home, the difference is the kind of cost this coverage is built for. The bills you'd be paying anyway are a different story, so ask your insurer before you assume any one of them is covered.

How much will it pay?

DOBI says loss of use coverage is "usually limited to 20 percent of Coverage A," your dwelling coverage. Your declarations page shows your actual limit, and your policy spells out anything else that applies, so read both before you sign a lease on a temporary place.

Condo and renters policies carry this coverage too. DOBI's guide says renters and condominium policies include additional living expenses, so if you own a condo, check your own policy, not only the association's.

What doesn't it cover?

• Flood. DOBI says homeowners policies exclude water damage caused by flood. Flood coverage comes from a separate policy, and FloodSmart, the National Flood Insurance Program's site, lists "temporary housing and additional living expenses during your home's repair" among the things a flood policy doesn't cover.
• Damage that isn't a covered loss. Coverage D follows the rest of your policy. If the damage isn't covered, the living expenses usually aren't either. DOBI's summary lists wear and tear, earthquakes and continuous seepage among the common exclusions.
• Costs without receipts. DOBI says it's important to keep receipts and documentation of the additional expenses for your insurance company to review.

How do you make a loss-of-use claim?

1. Report the loss as soon as possible. DOBI says to have your policy number ready and to write down the claim number and the adjuster's contact information.
2. Ask what documentation they need. Do this before you book a place for more than a few nights, so you know what they'll reimburse and how.
3. Keep every receipt. Lodging, meals, laundry and anything else you're spending because you can't be home.
4. Keep written notes. DOBI suggests keeping notes on your conversations about the claim.
5. Know your options if you disagree. DOBI lists its consumer line, 609-292-7272 or 800-446-7467, the company's internal appeals panel, the appraisal clause in your policy and hiring an attorney.

The rest of the claim has its own steps. Here's how a storm damage claim works in New Jersey.

What if the damage came from a declared disaster?

In a presidentially declared disaster, FEMA's housing assistance can include money to rent somewhere if you're displaced and reimbursement for emergency lodging, like a hotel. FEMA can't pay for costs your insurance covers, though. If 30 days or more have passed since you filed your insurance claim and you haven't received funds, FEMA says to call its helpline at 1-800-621-3362, and it may provide initial funds for temporary rental housing. Here's how FEMA assistance works with insurance.

Should you repair and move back, or sell?

Loss of use has a limit, so the repair timeline matters as much as the repair price. A realistic timeline tells you whether the coverage carries you all the way home or runs out halfway through.

That's where I come in. I'm a former New Jersey home builder and residential remodeler, so I can walk the house, tell you what the repairs involve and how long they tend to take, and help you get estimates from trades I know. Then you see two plans side by side: repair and move back or sell, or sell as-is, with what the home is worth each way. I don't handle or negotiate your claim; that stays between you and your insurer. How I plan around a change like this is on my life events page, and the Life Events Guide lays out the order of operations.

Frequently Asked Questions

What is loss-of-use coverage?

It's Coverage D on a New Jersey homeowners policy. DOBI says it helps pay additional living costs, beyond what you'd normally pay, when a covered loss forces you to live somewhere else temporarily.

Does homeowners insurance pay for a hotel after a fire?

Usually, if the fire is a covered loss and the home can't be lived in. DOBI's guide names reasonable hotel costs and additional meal and laundry expenses. Keep every receipt.

How much does loss-of-use coverage pay?

DOBI says it's usually limited to 20 percent of your dwelling coverage. Check your declarations page for your own limit.

Does flood insurance pay for somewhere to live during repairs?

No. FloodSmart lists temporary housing and additional living expenses during repairs among the things a flood policy doesn't cover. In a declared disaster, FEMA assistance may help.

This is general information, not legal, tax or lending advice. Your policy and your insurer's written decisions control.

About the author

Dennis Mark Interdonato is a REALTOR® and Master CDRE® who leads The Dennis Mark Group at Keller Williams Realty Ocean Living in Point Pleasant, NJ, helping buyers and sellers throughout New Jersey make their next move, with Monmouth and Ocean County as home base. Read more about Dennis Mark.

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• Hiring a contractor after storm or fire damage
• Have a question this didn't answer? Send it to Dennis Mark and it may become the next article.