Additional Living Expenses: When Your Rental Becomes Uninhabitable

If a fire, burst pipe, or other covered loss makes your rental unfit to live in, the loss-of-use part of your renters policy pays additional living expenses: the amount your costs rise above normal while you live somewhere else, such as a hotel, restaurant meals, and extra mileage, up to the limit on your declarations page. It pays nothing when the cause is a peril your policy excludes, such as a flood. Whether you still owe rent on the damaged unit is a separate question that your lease and state law answer.

What loss-of-use coverage pays

In the standard renters form, the HO-4 written by Insurance Services Office (ISO), this coverage starts when a listed peril damages your belongings or the building and makes your unit unfit to live in. What renters insurance covers lists those perils. The form pays any necessary increase in living expenses so your household can keep its normal standard of living. Texas and Washington insurance regulators list costs such as:

• A hotel, short-term rental, or apartment while repairs are made.
• Restaurant meals beyond your normal grocery spending.
• Laundry, and extra mileage for a longer drive to work or school.

How long and how much it pays:

• Time. The standard form pays for the shortest time needed to repair the damage or, if you move permanently, for your household to settle elsewhere, even if the policy expires in the meantime. Some policies add a time cap; the Texas Department of Insurance says policies usually pay for up to 12 months or until the limit runs out.
• Amount. The limit appears on your declarations page, the summary page of your policy, and the insurer reimburses reasonable amounts you spend up to it, subject to any deductible you still owe. The standard form applies the deductible, the amount you pay yourself, to the combined belongings and loss-of-use claim unless the policy says otherwise. If you reach the limit before repairs finish, you pay the rest.
• Evacuation orders. If a civil authority, such as a fire department or city building official, bars you from your home because a covered peril damaged a neighboring property, the standard form pays for up to two weeks.

What it does not pay:

• Costs you would have had anyway, such as your normal rent and utility bills.
• Losses or fees that come from canceling a lease or other agreement.
• A stay away from home during a power outage that did not damage your unit.
• Displacement caused by an excluded peril. Washington's insurance commissioner gives the example of a river that overflows its banks: without flood coverage, you pay to live elsewhere. National Flood Insurance Program policies do not pay additional living expenses either, so read flood insurance for renters before you rely on one.
• Problems your landlord fails to fix, such as no heat or a slow roof leak, because they are not losses from a listed peril. Those fall under your right to a habitable home.

Example: how your rent changes the payout

Your normal monthly costs are $1,600 in rent, $500 in groceries, and $80 in commuting. After a covered kitchen fire, the unit is unlivable for two months. A furnished short-term rental costs $2,400 a month, meals out cost $900 instead of $500, and the longer commute costs $200. Assume the belongings portion of the same claim has already satisfied any applicable deductible.

When you keep paying rent on the damaged unit, the whole cost of the temporary home counts as an increase, so the payout is larger and uses up the limit faster. With a $6,000 loss-of-use limit, the first column's two months fit. A third month would bring the total to 3 x $2,920 = $8,760, leaving $2,760 for you to pay.

Do you still owe rent on the damaged unit?

In these four states, a tenant can end the lease when a casualty such as a fire makes the home unusable through no fault of the tenant:

Ending the lease does not end loss-of-use payments right away: the standard form keeps paying for the shortest time your household needs to settle in a new home. If your state is not listed, look for a fire or casualty clause in your lease and ask a local legal aid office how your state handles a damaged unit.

The landlord's insurance protects the landlord's interests, such as the building and lost rent, and does not cover your belongings, Washington's insurance commissioner notes. In Texas, when the damage comes from an insured casualty such as fire, smoke, hail, or explosion, the landlord's time to make repairs does not start until the landlord receives the insurance money. If the home becomes unlivable because the landlord will not fix a problem, rather than because of a casualty, the rules for constructive eviction apply instead.

What to do when you have to move out

1. Report the loss to your insurer as soon as you are safe, and ask how it will pay your living expenses and what records it needs. How to file a renters insurance claim covers the claim itself.
2. Write down your normal monthly costs for rent, groceries, and commuting, so the adjuster can measure the increase, and keep every receipt from the day you leave.
3. Tell your landlord in writing whether you are ending the lease or plan to return, and get any rent reduction or termination agreement in writing.
4. Watch the limit. Compare your running total with the loss-of-use limit each week so the money lasts as long as the repairs, as Texas regulators advise.
5. Move belongings without losing coverage. The standard form's lower limit for property kept at another residence does not apply to items you move out because your unit is being repaired and is unfit to live in.
6. Look for disaster aid if the loss is not covered. FEMA grants require a presidential disaster declaration authorizing Individual Assistance in your area, and most floods do not get a presidential declaration. These grants can help with costs such as replacing furniture and clothing (800-621-3362 or DisasterAssistance.gov, which also lists hotels that accept FEMA's Transitional Sheltering Assistance). Renters may also qualify for U.S. Small Business Administration disaster loans under an SBA declaration without a presidential declaration.