Renters insurance may feel like one of those expenses that don’t add much to your life. But when damage occurs to your apartment or rental home, you’ll be glad you paid those premiums each year. In addition to covering any damage to your personal property, most policies also include renters insurance displacement coverage. That makes sure you receive financial reimbursement in certain scenarios when you need to leave your rental while repairs are made.
But there are specific steps you must take to be eligible — and there are limitations to this coverage. Here’s what you need to know about getting temporary housing coverage through your renters insurance policy.
Key Points
• Renters insurance helps cover displacement costs when the apartment or house that you rent has been damaged.
• Covered expenses include lodging, food, laundry, storage, and parking fees.
• Displacement coverage applies to specific perils, not all situations.
• Policies have reimbursement limits and time restrictions; read the fine print.
• Keep detailed records of your expenses to file for potential reimbursement.
Understanding Displacement and Renters Insurance
When you don’t own the building where you live, your landlord’s insurance won’t cover your losses in case of calamity. Instead, there’s renters insurance coverage available.
Renters insurance provides financial protection in a variety of circumstances.
Two common aspects are coverage for your possessions and legal liability. If your belongings get damaged due to a covered peril such as fire or vandalism, you can file a claim to be reimbursed for any amount up to your policy limit. Liability covers payment for any lawsuits that might arise if you or your family cause damage or injury to other people, or if someone is harmed in your home.
Here’s where renters insurance displacement coverage comes in. Say there’s a fire in your building, and it’s not safe to stay there while the damage is being fixed. Many renters insurance policies will reimburse you for all the additional living expenses you pay when staying elsewhere until you can move back into your rental unit. Each policy has its restrictions and limits, so it’s important to know what to look for before making arrangements.
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How Renters Insurance Covers Temporary Housing Expenses
How does renters insurance cover displacement? Here are five common categories that may be covered under “loss of use” provisions in your policy.
Lodging
The costliest item covered with a displacement policy is your lodging, whether that’s a hotel or a temporary rental. Note, however, that the size of your hotel is expected to be similar to your rental. You generally can’t book a large suite or four-bedroom Airbnb if you live in a one-bedroom apartment.
Food
If your lodging doesn’t have a kitchen where you can cook, your policy may also provide partial reimbursement for eating out. Typically the reimbursement would be based on the amount you spent that exceeded your normal cost of groceries. You could also potentially be reimbursed for any food loss that happened at your apartment because of a power outage or other covered event.
Laundry
This is another need that can cost more when you’re temporarily living elsewhere. If you have to go to the laundromat or use a laundry service when you would normally wash your clothes inside your home, your policy may reimburse you for the extra costs.
Storage
When you’re displaced from your rental, you may incur storage unit expenses, especially if major repairs are underway and you need to move out some or all of your belongings. The cost of renting a storage unit may be covered under a “loss of use” provision in your policy. As for damage to your possessions while they’re in the unit, you typically have limited off-premises storage unit coverage as part of your personal property protection.
Parking and gas
If you have to pay parking fees at your hotel or buy additional gas for a longer drive to work each day, you may be compensated for these extra expenses as well.
Loss of Use Coverage Limits and Exclusions
Does renters insurance cover temporary housing in all scenarios? No. The damage caused to your rental home must be a result of a covered loss outlined in your policy. Typically, covered losses come from these calamities, among others:
• Kitchen fires
• Flooding caused by burst pipes
• Water leaks from appliances
• Sewage backups
• Hail, ice, snow, windstorms
• Freezing weather
• Vandalism
Damage caused by weather-related flooding typically isn’t covered unless you have also put a separate renters insurance flood policy in place. The same goes for damage from earthquakes and sinkholes.
Also, watch for any restrictions or limitations in your policy. The fine print may specify time limits; for instance, you may not be eligible to file a claim if repairs are completed within a certain time frame, such as 15 to 30 days. You may also have constraints on how much you can spend and for how long.
Preparing for Potential Displacement
There are several things to do before you leave your rental due to displacement. For starters, call your insurance company and ask about policy limitations, when coverage kicks in, and what documentation they need for all of your expenses.
If you need to move out any of your belongings, look for a storage unit and make arrangements to transfer everything before you leave.
Even if all of your extra expenses are covered by the cost of your renters insurance, remember that most policies will reimburse your costs. That means you’d probably need to shell out for all of your expenses upfront. So it’s wise to have a plan for how you’d pay for everything you need (by tapping into your emergency fund, for instance).
What to Do If You’re Displaced from Your Rental
Depending on state laws, you may be able to negotiate a rent reduction with your landlord if you’re forced to leave due to repairs. Your lease may have details on any kind of notice and compensation your landlord is responsible for.
Also keep detailed receipts for your costs of living outside of your rental. From hotel bills to food expenses, track everything so that you can file a complete claim and get reimbursed as quickly as possible.
The Takeaway
When damage to your rental house or apartment forces you to temporarily relocate, your renters insurance is likely to cover many of the costs of displacement. Eligible expenses typically include lodging, extra food, laundry services, parking, and more. Carefully track your spending to help ensure you get the reimbursement you’re entitled to.
When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.
FAQ
What types of expenses does loss of use typically cover?
Loss of use coverage in your renters insurance policy usually includes lodging, food expenses beyond your normal budget, extra laundry expenses, storage of your belongings, and additional parking and gas costs.
How much loss of use coverage do I usually have?
Loss of use coverage is stated in your policy, usually either as a flat amount or a percentage of your personal property coverage. Flat amounts usually range between $3,000 and $5,000, or you could be covered for 30% to 40% of your personal property limit.
Does “loss of use” coverage pay my normal monthly rent?
No, loss of use coverage does not pay your monthly rent. It covers additional living expenses you incur because of being displaced. However, due to the damage, your landlord may be required to reduce your rent — depending on your lease agreement and the state in which you live.
What if I’m displaced by something not covered, like a flood?
If you can’t live in your rental home due to an uncovered peril, you’ll be on the hook for those extra living costs. Depending on the cause, you may be eligible for assistance from FEMA or other organizations, particularly if there is a declared disaster.
How long will insurance pay for my temporary housing?
The amount of time insurance pays for temporary housing depends on the details of your policy. Usually, there are limitations, often up to 30 days.
photo credit: iStock/Perawit Boonchu
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