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Insurance · Homeowners Policies

What does 'loss of use' / 'additional living expense' coverage in a homeowners policy provide?

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

Correct answer

Reimbursement for the extra costs of living elsewhere (such as temporary housing and meals beyond normal expenses) while the home is uninhabitable due to a covered loss

  1. A Coverage for the insured's vehicle
  2. B Payment for the mortgage balance
  3. C Reimbursement for the extra costs of living elsewhere (such as temporary housing and meals beyond normal expenses) while the home is uninhabitable due to a covered loss
  4. D Payment for the land value

Why this is the answer

Loss of use coverage (Coverage D), often called additional living expense (ALE), reimburses the insured for the increase in living costs they incur when their home becomes uninhabitable because of a covered loss — for example, the cost of a hotel or rental, restaurant meals, and other expenses above their normal living costs, during the reasonable time needed to repair or rebuild. It may also cover lost rental income if part of the home was rented out. It does not pay the mortgage or the property's value. Understanding loss-of-use/ALE coverage as protection for the extra costs of being displaced is standard homeowners content frequently tested on the exam.
Source: NAIC Model Outline, Loss of Use

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About this topic: Homeowners Policies

Homeowners questions cover the HO forms (HO-2 through HO-8), the coverage sections (dwelling, other structures, personal property, loss of use, liability, medical payments), the perils, exclusions and endorsements. This is one of 21 Property Insurance questions on homeowners policies, each with a full explanation on a single study page.

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