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Understanding the ‘Loss of Use’ Cover in Home Insurance

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When you buy a home insurance policy, you get protection against various issues related to your property. A major benefit of getting home insurance is that you get financial backing if there is any unforeseen incident which forces you to repair your house, or even worse, forces you to evacuate the place. One such cover is the loss of use cover. Here, the insurance provider compensates you if you have to live at a different location following some damage to your property. What exactly is this cover and why is it significant? Let’s find out.

What is loss of use coverage and what does it cover?

It is very important to have insurance these days. While many people limit their insurance purchases to only life and health plans, it is equally important to get a home insurance cover too, especially if you have worked hard to buy a house of your own. While some people buy a house to live in it themselves, others rent it out and that becomes a steady source of income. Hence, when the property is damaged due to some reason and becomes inhabitable, the homeowner suffers losses. If you are a homeowner who is in this situation, you may have to move out and pay rent for another house while your home is repaired. Alternatively, if you have put your house on rent and the tenants need to move out due to the damages, you will lose your rental income. In both these cases, you will be eligible for the ‘loss of use’ cover. Therefore, this becomes a significant cover that every homeowner can benefit from.

What expenses are covered by additional living expenses?

As mentioned, the loss of use benefit covers many expenses. Some of them are:

● Rent expenses when living in temporary accommodation:

Buying a house and calling it your own home is a comfort and a luxury. However, it is also a financial benefit as you save a lot of money on rent. Rent is very high these days, especially if you are living in a big, tier 1 city. However, if due to some reason, your home gets damaged, you will be forced to move out and take a rented accommodation till the time your home is repaired and fit to live in again. At such a time, paying the rent can become a challenge, but if you have a home policy, it becomes easier. You can get reimbursed for the rent amount under the loss of use coverage.

● Loss of rent income:

As stated, rent is quite high in the big Indian cities. If you have put your house on rent, you must be earning a handsome amount as rent and that may even be your primary source of income. If the house gets damaged and your tenants are forced to move out, you will lose this source of income. At such a time, you will receive compensation under the loss of use cover for the loss of rent income. This is highly beneficial merit of your having the loss of use cover in the comprehensive home insurance plan that you buy.

● Packing and moving expenses:

Anyone who has shifted from one house to the other is aware of how high the packing and moving costs are! When you are moving into temporary accommodation, you will need to hire a packing and moving company and carry some things to your new residence. Then, when moving back, the same procedure would have to be repeated. To take care of the expenses, you will need the backing of a good home plan. The loss of use coverage will take care of these expenses.

● Food and lodging expenses:

If the damage is not too much and can be mended in a short time, you need to move out for just a few days. Then, living in a hotel or guest house may suffice, rather than taking an entire apartment for rent. In this scenario, the insurance provider will compensate for the food and lodging expenses till the time you have to stay in the hotel.

What is not covered by loss of use coverage?

The loss of use cover in a home insurance policy only covers the expenses that stem out of damages to another insured component. For example, all the rooms in the house are insured. So, if the roof of the kitchen collapses because of which you need to evacuate, you will get compensation for it. However, if there is an external garage or even a room in the garden that is not attached to the house, it will not be covered under the comprehensive home policy. You may be using that room for staying or may have rented it out. Expenses resulting from any damage to that room won't be entertained under the loss of use coverage.

How much loss of use coverage do I need?

Since the loss of use is a significant overhead, you need to choose a substantial amount for it. Ideally, you should have an amount equal to 20% to 30% of the total home insurance cover. This should be enough if you temporarily lose access to your property and need to pay for the expenses in the interim period.

How to file a loss of use claim

Most general insurance companies in India have a modern and user-friendly website nowadays. You can file all types of insurance claims, including the various home insurance claims easily and quickly through the portal of your insurance provider.

Conclusion

As you can clearly see from the points mentioned above, a home insurance plan is vital. It has many good benefits, such as the loss of use cover, which come in very handy in the time of emergencies. If you are planning to invest in a home plan, explore your options, compare the policies and then choose the best plan at the best rate.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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