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Home Insurance Coverage Characteristics - Loss of Use and Additional Coverages

Home Insurance Coverage Characteristics

Before discussing the exclusions applicable to the property coverages of homeowners policies, there are two additional categories of property coverage grants that need to be discussed. These are: 
  • loss of use coverage and
  • miscellaneous additional coverages, frequently grouped under a heading in the policy referring to additional or additional protection.

The loss of use coverages fall into three general categories: 
  • additional living expense;
  • fair rental value; and,
  • loss due to civil authority.
In general, in order for loss of use coverages to be triggered, there must first be a covered loss to residence premises. In other words, a covered loss of use must be a consequence of a covered direct physical loss to residence premises.


Additional Living Expense Coverage

Under the ISO HO 2 and HO 3 homeowners policies, if a loss covered under the policy's dwelling coverage renders the part of the residence premises where the insured resides unfit to live in, the insurer will pay any reasonable increase in living expenses incurred by the insured so that the insured's household can maintain its normal standard of living. Home Insurance Coverage Characteristics

The insurer will make the additional living expense payments for the shortest time required to repair or replace the damage or, if the insured permanently relocates, the shortest time required for the insured's household to settle elsewhere. These time periods are not limited by the expiration of the policy.

In some states, these time periods are made subject to an objective standard. In other words, the shortest time to repair or replace the damage would be the time that an objectively reasonable contractor would require to complete the repair or replacement work. 

In other states, the time period during which additional living expense payments will be made is held to be governed by what circumstances are or are not within the insured's control. Such circumstances could range from the unavailability of materials or the unavailability of a qualified contractor, to a dispute with the insurer over coverage for the damage to the residence, which delays the repair work.

Fair Rental Value Coverage

Fair rental value coverage applies when there is covered damage to that part of residence premises that the insured rents or holds for rental to others that render the premises unfit to live in. The insurer will pay the fair rental value of the premises, less any expenses that do not continue while the premises remain unfit to live in. Such fair rental value payments will be made for the shortest time required to repair or replace the premises.

The same issues exist as to whether the shortest time required to repair or replace the damaged premises is governed by a theoretical objective standard or by some other standard that takes into account other factors. 

Civil Authority Loss of Use Coverage

Under this coverage, additional living expense or fair rental value coverage is available for no more than two weeks if civil authority prohibits the insured from use of residence premises as a direct result of damage to neighboring premises by an insured peril. The loss of use coverages further provide that no coverage exists for loss or expense due to cancellation of a lease or other agreement.

The loss of use coverages of homeowners policies issued by insurers that do not use the standard ISO HO 2 or HO 3 policy forms often are substantially similar to the standard form policies. Some insurers impose a 12-month maximum period for which additional living expense or fair rental value payments will be made. Others do not include such a fixed maximum period of recovery limitation.

Some insurers' policies base the availability of loss of use benefits due to order of civil authority on the existence of direct damage to a neighboring property that would constitute a covered loss under their respective policies.
Others do not use the covered loss to adjoining property limitation at all. Home Insurance Coverage Characteristics


Homeowners policies contain several additional coverages, some of which relate to and are dependent on the existence of a covered building or contents loss and some of which are not. Many insureds probably fail to make claims that otherwise would be covered owing to the lack of knowledge that their policy covered such losses. These additional coverages are extensive, covering the better part of four pages in the ISO HO 2 and HO 3 policies, and include the following.

Debris Removal 

The policy's coverage includes the costs of removing debris of covered property resulting from a loss caused by an insured peril. The debris removal coverage also applies to costs of removal of volcanic ash, dust, or particles from a volcanic eruption that has caused a direct physical loss to covered buildings or contents.

Debris removal expenses are included within the policy limits unless the total damage equals or exceeds the policy limits. In that case, the policy will pay debris removal expenses in addition to the policy limit, subject to the maximum of 5% of the limit applicable to the damaged property.

The debris removal coverage also extends to the costs of removal of the insured's downed trees felled by windstorm, hail, weight of ice, snow, or sleet and neighbors' trees felled by one of the policy's named perils, if one of two circumstances exist:

1. the felled tree damages a covered structure or
2. the felled tree blocks a driveway, handicapped access ramp, or fixture.

This coverage is subject to a maximum of $1,000 for any one loss and a $500 maximum for the removal of any one tree. These amounts are payable in addition to the policy limit.

Reasonable Repairs

The heading for this category of additional coverages is not generally descriptive. These are really two distinct coverages. First, the policy covers the reasonable costs incurred by the insured to protect covered property that has been damaged by a covered peril from further damage.

Second, if the measures taken by the insured to prevent further damage also involve repair costs, those repair costs will be covered. Again, the property in question must be covered property and the damage must have been caused by a covered cause of loss.

Neither of these coverages increases the policy limit applicable to the damaged covered property. Nor do these provisions relieve the insured of any of his or her duties stated in the policy's conditions, which include keeping accurate records of expenses, including repair expenses. 

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