Have you ever wondered what “Coverage D – Loss of Use” coverage is? Here’s a quick explanation with some everyday examples.
What is Coverage D?
Coverage D is provided when the residence premises (i.e., where you live) is uninhabitable due to a covered loss (e.g., water damage from a burst pipe). This coverage applies when there are additional out-of-pocket expenses beyond your normal monthly expenses. Often these expenses are paid on an incurred basis, which means we’ll reimburse you once you’ve submitted receipts, etc.
For example, let’s say there is severe water damage to the home that you live in. First, we’ll investigate and determine whether this is a covered loss. Then, we’ll determine if the damage is extensive enough that you’d need to leave the home during the repair. If it is, you’ll be covered by Coverage D – Loss of Use.
What’s included in Coverage D?
Because your home mortgage is part of your normal monthly expenses, the coverage would not include it. However, because you cannot stay in your home until the repairs are made, we could include temporary housing or a hotel as part of the loss. The policy typically provides coverage for the average cost of the expenses incurred in your local area up to your Coverage D limit.
Food costs are already part of your usual monthly expenses. If the temporary housing provides a kitchen, we would not cover your food costs. But if you’re temporarily living in a hotel and don’t have access to a kitchen, your food costs would increase. The policy would typically extend coverage for the increased amount spent on food, not the full monthly/weekly expense. The cost of boarding your pet could also be included. What if you choose to stay at your second home? You would receive coverage if you were losing rental income, but not if this is your private vacation home.
Here are two more examples:
Let’s say your average weekly expense to feed the members of your household is $250. Due to a covered loss, you stay at a hotel for seven days and eat out for lunch and dinner, which costs $375. The policy would provide coverage for the additional out of pocket expense of $125, once the deductible for this loss has been met.
Or, let’s say your home suffered an electrical fire. Your home is deemed unlivable due to fire damage, smoke and soot, and water damage from the fire department. Loss of Use covered the hotel stay immediately after the fire, a portion of the food while at the hotel, and the temporary housing for the nine-month rebuild process, and you received a total payment of $24,546 under Coverage D.