• When you purchase a home insurance policy, you receive protection against various problems related to your property. A significant advantage of obtaining home insurance is that it provides financial support if there is an unexpected event that requires you to fix your home, or even worse, compels you to leave the premises. One specific type of coverage is the loss of use coverage. In this case, the insurance company compensates you if you must reside at a different location due to damage to your property. What is this coverage precisely, and why is it important? Let’s explore.

What is loss of use coverage, and what does it encompass?

• Having insurance is crucial in today’s world. While numerous individuals confine their insurance purchases to merely life and health plans, it is just as vital to obtain home insurance, especially if you have put in considerable effort to acquire your own house. Some individuals buy a home to live in themselves, while others lease it out, providing a steady income source. Therefore, when the property sustains damage and becomes uninhabitable, the homeowner faces losses. If you are a homeowner encountering this scenario, you may need to relocate and pay rent for another place while your home undergoes repairs. Alternatively, if you have rented your house out and the tenants must vacate due to the damages, you will forfeit your rental income. In either situation, you will qualify for the ‘loss of use’ coverage. Hence, this becomes an essential coverage that every homeowner can take advantage of.

What costs are included in additional living expenses?

As noted, the loss of use benefit includes various expenses. A few of these are:

● Rent expenses for living in temporary housing:
Purchasing a house and referring to it as your own home is both a comfort and a luxury. However, it also offers financial advantages, as you save a considerable amount of money on rent. Rent prices are quite high nowadays, particularly if you reside in a major tier 1 city. Nevertheless, if your home becomes damaged for any reason, you will be compelled to relocate and find rented accommodation until your home is repaired and livable once more. During such times, managing the rent can become challenging, but with a home policy, it becomes more feasible. You can receive reimbursement for the rent amount through the loss of use coverage.

● Loss of rental income:
As mentioned, rental prices are quite elevated in major Indian cities. If you have rented out your home, you are likely earning a significant sum from rent, which may even be your main source of income. Should the house sustain damage and your tenants need to vacate, you will forfeit this income stream. During such circumstances, you will receive compensation through the loss of use coverage for the loss of rental income. This is a major advantage of possessing the loss of use coverage in the comprehensive home insurance policy that you purchase.

● Packing and moving costs:
Anyone who has relocated from one residence to another knows how steep the packing and moving expenses can be! When you are transitioning to temporary living arrangements, you will need to engage a packing and moving service and transport items to your new home. Then, upon returning, you will have to repeat the same process. To manage these costs, you will require support from a solid home insurance plan. The loss of use coverage will address these costs.

● Food and lodging costs:
If the damage is minimal and can be repaired quickly, you may need to vacate for only a few days. Then, staying in a hotel or guesthouse may be sufficient rather than renting an entire apartment. In this case, the insurance company will reimburse the food and lodging expenses for the duration of your hotel stay.

What is excluded from loss of use coverage?

The loss of use coverage within a home insurance policy only pays for expenses that arise from damages to another covered component. For instance, if all rooms in the house are insured, and the kitchen roof collapses, necessitating evacuation, you will receive compensation for it. However, should there be an external garage or a garden room that is not connected to the house, it will not be included under the comprehensive home policy. Even if that room is utilized for living or rented out, expenses due to any damage to that space will not be accommodated under the loss of use coverage.

How much loss of use coverage is necessary?

As the loss of use represents a considerable expense, it is important to select a substantial coverage amount. Ideally, you should aim for an amount that is equal to 20% to 30% of the total home insurance coverage. This should be sufficient in case you temporarily lose access to your property and need to cover expenses during that interim period.

How to submit a loss of use claim

Most general insurance companies in India currently offer modern and user-friendly websites. You can file all types of insurance claims, including the various home insurance claims, quickly and easily through your insurance provider’s portal.

Conclusion

As you can obviously observe from the points stated above, a home insurance policy is essential. It offers numerous advantages, such as coverage for loss of use, which can be extremely useful during times of crisis. If you intend to invest in a home policy, investigate your choices, evaluate the policies, and subsequently select the most suitable plan at the most favorable rate.