When disaster strikes and your home becomes unlivable, finding a place to stay shouldn’t add to the stress of the situation. Standard home insurance policies may be able to cover a hotel (or other temporary housing) after a covered loss.
It’s called “loss of use” coverage, or you’ll also see it referred to as “additional living expenses” coverage, or simply coverage D on your policy. But don’t book the hotel just yet. In this article, we’ll explain when this coverage can help with a hotel and when it won’t.
When does homeowners insurance cover a hotel?
Home insurance may help reimburse you for expenses that happen if your home is deemed unlivable by your carrier. Your carrier will assess the extent of the damage and decide.
Because of this, there are also certain times where your policy will and won’t cover a hotel.
Your home is uninhabitable after a covered loss
A covered loss is when an insurance carrier agrees that your policy should pay for the damages. In standard policies, loss of use coverage will help pay for a hotel or temporary living in the following situations:
- Fire& smoke
- Storm damage
- Burst pipe
- Structural failures
- Vandalism
These situations may result in coverage for temporary housing if a covered loss has made your home unlivable. If the damage is significant that you had to leave your home and need to stay out of it for repairs, your policy should cover it.
Government-Mandated Evacuations (Civil Authority Coverage)
There may be times your policy can help cover temporary housing, even if your home hasn’t been directly damaged. Civil authority coverage may apply when government authorities (such as local officials, police, or fire departments) may issue mandatory evacuations or prohibited access to your home.
These typically happen ahead of natural disasters or emergencies such as:
- Wildfires
- Hurricanes
- Tornadoes
- Gas leaks
- Downed power lines
There may be more situations, but for your policy to cover temporary housing, there must be an official order to evacuate. Voluntary evacuation does not apply here.
Additionally, evacuations due to floods or earthquakes, even if there was a mandatory notice, typically do not cover temporary housing.
Civil authority claims have time restrictions. Filing a claim under civil authority typically has a waiting period to activate, anywhere between 24 to 72 hours after the government action. Coverage is restricted to a window of time, often lasting up to two weeks (14 days). In some cases, it may last up to 30, though this is dependent on your policy.
If you’re ever uncertain about how long civil authority will cover temporary housing, it’s best to check with your carrier or insurance agent if you have one.
When does insurance not cover a hotel?
There are times when your policy won’t cover a hotel. Certain natural disasters or wear and tear that could make your home unlivable are:
- Power outages from utility company
- Broken AC
- Maintenance issues
- Flood or earthquake
- Voluntary evacuation
- Mold or wear and tear
Many of these are considered exclusions to a policy. Some natural disasters (like floods and earthquakes to name a couple) require specific coverage that only repairs the damage done to your home. It won’t pay for a hotel.
You may have been told to evacuate ahead of the flood, but a flood insurance policy typically won’t pay for temporary housing. If your home sustains damage and you cannot live in it while it’s being repaired, a flood insurance policy typically will not cover a hotel.
Insurance is intended for sudden loss, so wear and tear or broken fixtures that aren’t covered by your policy also won’t pay for temporary housing.
What is Loss of Use (Additional Living Expenses)
A hotel is covered due to a part of your homeowners insurance policy called loss of use coverage. It’s also referred to as additional living expenses (ALE), or simply coverage D on your policy.
If your home is deemed unlivable due to a covered loss, then temporary housing (like a hotel) will be covered. However, it can cover other expenses that come up such as:
- Meals
- Public transportation or gas (if your temporary housing is further away from work)
- Boarding a pet (if the hotel is not pet friendly)
This is just a brief overview of loss of use coverage. We detail it further in our loss of use explained article.
How much will insurance pay for a hotel?
Loss of use coverage pays anywhere between 10% to 30% of your dwelling coverage, though it’s more common to see 20%.
The hotel should be comparable or similar to your current living situation, so you won’t have to cram your whole family into one room. However, it’s not recommended to try and find a high-end, luxury hotel living situation either.
For example, if your dwelling coverage is set at $400,000, and your loss of use coverage is set at 20%, you have up to $80,000 available for a temporary living situation and other expenses.
How long will insurance pay for a hotel?
Your policy may say it will pay for your temporary housing “until repairs are finished.” However, it does come with a time limit. Typically, you’ll see anywhere between 12 and 24 months.
Time limits will vary by policy, but maximum durations are usually set for loss of use coverage. Double check with your carrier or your own policy to see how long you’re covered for accurate information.
Your policy will cover the hotel until one of the following happens first:
- You reach your policy’s monetary limits
- Your policy’s time limit expires
- Your home is repaired and you can return to it safely
How to file a claim for hotel coverage?
Once your home has been damaged, you need to notify your carrier promptly. Be prepared to provide the typical documentation (videos, pictures) of the damage when you go to file your claim.
Here’s a quick overview on what you need to know when it comes to filing a claim:
- File immediately: Your carrier needs to be notified as soon as possible. You’ll be able to do so through your carrier’s mobile app, online portal, or over the phone. Be prepared to provide proof of damage (photos, videos, etc.).
- Work with your adjuster: An adjuster will be assigned to the case. They can help you understand your policy limits and determine appropriate temporary housing.
- Keep all receipts: Keep in mind that your determined percentage allocated for loss of use and additional living expenses accounts for more than just your hotel stay. Keep all receipts(preferably in chronological order)that you acquire while living outside of your home.
- Record normal expenses: Your carrier may ask for a breakdown of your standard living costs to use as a baseline. Additional living expenses are reimbursed only if they exceed what you normally pay for things like gas or groceries/food.
Does the insurance carrier pay the hotel directly or reimburse me?
In most cases, you will need to submit the receipt for your hotel to your carrier to be reimbursed. Unless your carrier works directly with a hotel, the carrier typically won’t pay the hotel directly.
This is why it’s important to keep your receipts that you acquire while your home is being repaired. Once your coverage is confirmed, you’ll pay for temporary housing upfront. It’s important to keep detailed records of your standard expenses and only claim costs that exceed your normal living expenses.
There may be situations where your carrier can issue an advance payment. However, this varies by carrier, and by claim. You’ll want to confirm the process with your adjuster and carrier. Because of this, it may be a good idea to ask your carrier early how they handle the payout for loss of use and additional living expenses so you can plan accordingly.
Frequently Asked Questions
Can I stay in an AirBnB instead of a hotel?
Yes, AirBnB’s may be an acceptable form of temporary housing. The key requirement is to make sure that your temporary housing is reasonable and comparable to your normal living situation. Some insurers may require approval before booking. You can ask your carrier or adjuster for verification and clarification on what’s acceptable for your temporary housing.
Does renters or condo insurance cover a hotel?
Yes, both condo and renters insurance policies typically include loss of use coverage for a covered loss. Just like with a home insurance policy, coverage limits and payment methods will vary from carrier to carrier and policy to policy. You’ll need to review your policy for specific details.
Does insurance cover hotels during a power outage?
No, loss of use coverage typically doesn’t cover power outages, unless the outage is directly related to a covered loss that also makes your home uninhabitable. For example, a city-wide power outage that wasn’t the result of a natural disaster or resulted in damage to your home is not covered.
Does insurance cover a hotel after a hurricane?
It may cover a hotel if the hurricane caused damage to your home that made it unlivable. However, if the damage was caused specifically by flooding, that typically won’t be covered by home insurance. Flood damage needs a separate policy and will only repair your home, not cover temporary housing. Coverage depends on the specific cause of damage and your policy details.
