Understanding the Loss of Use for Renters Insurance

As a concerned tenant, you ought to explore the best renter’s insurance packages that could secure your belongings. Since the homeowner’s insurance doesn’t cover tenants’ belongings, it makes sense to have one of these policies in place.

Did you know that renter’s insurance policies generally come with a provision called “loss of use”? Well, in case you didn’t, this article will comprehensively explain the concept. 

Speaking of which, if you’re looking for renter’s insurance, you should consider working with the best Toronto tenant insurance brokers, as they can help you make the most of your options.

What is loss of use renters insurance? Understand with examples

Certain perils might render a home unsuitable for use for tenants. Under these circumstances, you might incur some additional or relocation expenses.

You can get these expenses covered with the provision for renters insurance loss of use.

Simply put, this coverage would help you manage the extra cost of living, given that your rented property is not suitable to reside in. The loss of use is calculated on the additional amount, considering what you usually spend on the regular expenses.

For instance, if you are unable to cook food in your kitchen due to water damage or fire, you may have to visit a restaurant for your meals. Previously, your regular grocery expense was $400, but it costs you $750 to buy the meals from a restaurant throughout the month. Therefore, your provision for loss of use tenant insurance would cover the additional $350.

Check out some other examples that will help you understand the provisions.

  • Additional costs for fuel
  • Additional utility expenses
  • Temporary housing like rental home or hotel
  • Moving expenses
  • Laundry costs
  • Storage units
  • Additional expenses on cooking supplies
  • Boarding for pets
  • Parking fees
  • Fees for public transportation

What does this insurance coverage include?

You will benefit from three types of provisions under loss of use as a tenant. These include:

1. Coverage for additional living expenses

If your rented property becomes uninhabitable due to water damage, fire, or any other peril, you will get the extra expenses reimbursed.

This policy aims to help tenants restore their standard of living. Therefore, if you reside in a small one-bedroom flat, your insurer will cover the expenses if you need to move to a similar apartment, not a luxury villa.

Moreover, the insurer will cover the extra living expenses for a stipulated time frame. This time is predetermined when you sign the policy. Usually, insurers consider the shortest of the following options.

  • A period of 12 to 24 months
  • The time needed to resettle in a different place
  • The time needed to fix the damage or repair the place 

2. Fair rental value

Popularly known as loss of rent insurance, the fair rental value would reimburse tenants the lost rental value if they need to rent another home. However, the damage to the property should be severe enough to render it unlivable. Remember that you would get this kind of benefit from the insurer for a certain period.

3. Prohibited use

Prohibited use comes with a special provision under loss of use for renter’s insurance. This is applicable if a government authority prevents the tenants from accessing their homes even when there is no damage. For instance, there might be storm damage in the locality, following which the authorities restrict civil access to a place. In this case, you can benefit from reimbursement from prohibited use.

However, please note that you won’t get the coverage by a simple order to evacuate the area. When you file a claim, the insurer will check whether the neighbouring homes have sustained physical damage.

When doesn’t your renter’s insurance provide loss of use benefits?

Before you buy your tenant’s insurance, check out the list of perils that the insurer would cover. In case the damage is triggered by a peril that is not on the list, you won’t benefit from the coverage. The standard policies do not include some destructive elements that might render your home useless. Pest infestations, floods, and earthquakes are commonly excluded from the list of perils.

However, it can be challenging to maintain the same lifestyle standard in the face of these events. To make things easier, most insurers offer additional policies or endorsements. A little homework on your end will help you choose the right policy. Alternatively, you can also seek help from insurance experts.

What would be the right amount of loss of use coverage?

With standard tenants or renter’s insurance policies, the loss of use coverage is around 30% of the overall coverage that the insurer promises. In certain policies, the personal property coverage is around $30,000. This implies that the insurer will offer you around $9,000 to manage the additional living expenses.

For most families, this amount proves to be sufficient. For most disasters, this coverage would be adequate to manage the temporary expenses. However, if you need more coverage, it makes sense to purchase additional personal property coverage from your insurer. Ultimately, this would weigh heavily on your pockets when you shell out your premiums.

It makes sense to consider the probable perils when you make your decision. For instance, if your area is prone to fires, wind, or hurricanes, it would be wise to have more coverage in place. Likewise, if the location is sensitive to civil commotions, riots, thefts, or vandalism, you should increase your coverage.

Endnote

Now that you know what the provision of renters insurance loss of use means for you, it would be easier for you to shop around. Note that most insurers would try to provide the benefits for the shortest period possible. Therefore, you need to be careful about the insurer you choose.