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What Montana Property and Business Owners Need to Know

understanding loss of use insurance coverage

What is loss of use coverage?

Loss of use coverage is part of a homeowners insurance policy that covers your living expenses if your home becomes inhabitable due to a peril such as house fire or natural disaster (hurricane, tornado, wind damage, etc.). Also known as Additional Living Expenses (ALE) or Coverage D, loss of use coverage provides reimbursement of the cost to live temporarily at a hotel or comparable property to your home. It includes other living expenses too, like moving costs and food.

What is the difference between loss of use coverage and business interruption insurance?

Both loss of use coverage and business interruption are types of insurance that cover expenses incurred due to an unexpected event that causes damage to the property. Loss of use coverage is meant for homeowners and as the name implies, business interruption insurance, also known as business income coverage, is for businesses.

As stated above, loss of use coverage provides payments for homeowners during the period in which their home is being repaired or rebuilt. It covers temporary living expenses. Business interruption insurance helps business owners recover after a forced closure (due to covered events) by providing payments to make up for lost income and to temporarily pay employees who can no longer work due to closure.

Both loss of use coverage and business interruption insurance cover financial costs during the restoration of the home or building but do NOT cover costs of the repairs and rebuilding. While some policies may combine various types of insurance, the cost of labor and materials of rebuilding your home or business is a separate coverage that may or may not be included in homeowners insurance or commercial property insurance.

Just like other types of insurance policies, there is a coverage limit. The coverage will last however long it takes to to repair or rebuild your home or restore your business, unless you reach the limit of your policy.

What does business interruption insurance cover?

During the restoration period, business interruption insurance covers the following:

  • Loss of revenue. This is based on your previous financial records, so it’s important to keep them accurate, accessible, and stored digitally.
  • Taxes
  • Monthly mortgage or lease payments
  • Relocation expenses
  • Employee wages
  • Training costs

What does loss of use insurance cover?

Covered expenses are used to maintain the same standard of living you had while in your home. The expenses must be within reason. Claims for lavish accommodations or meals may be denied by the insurance provider. The following expenses may be covered by your policy:

  • Lodging, whether it’s a hotel or rental home
  • Laundry, if you don’t have access to a washer and dryer
  • Cost of storage for your belongings, if necessary
  • Moving
  • Pet boarding, if the hotel or rental home doesn’t allow pets
  • Meals if your accommodation does not have a kitchen
  • Rent if the damaged home or building housed tenants

Some items that are not covered include mortgage payments, property taxes, utility and energy bills.

Does your current policy/policies include this critical piece of coverage?

If you are unsure if you have this loss of use coverage, talk with a representative of your homeowners insurance company. Coverage, limits, and prices vary by company, so ask questions to better understand your coverage. Keep in mind that loss of use coverage only applies if your home was damaged due to causes that are covered in your policy. If your home was damaged due to a flood and you do not have an additional flood insurance policy, your claim will be denied. Covered instances typically include fire, hurricane, winds,

When would you need loss of use coverage?

It’s important to have loss of use coverage if you become displaced due to an unexpected incident. Knowing that you will have financial assistance will give you peace of mind in the event a natural disaster or fire damages or destroys your property. If any of the following perils cause damage to your home or business and you need to relocate, you will want loss of use coverage to help:

  • Fire
  • Lightning strike
  • Smoke
  • Vandalism
  • Snow or ice
  • Hurricane
  • Windstorm
  • Hail

Note that earthquakes and floods are not covered unless they are separately added to the policy. This usually comes at an additional charge.

What to Do if Disaster Strikes

Home owners or business owners in South-Central Montana cities such as Billings, Laurel, or Red Lodge should immediately contact their insurance company and then get help from an expert disaster restoration contractor to limit the downtime for their home or business and minimize losses. Contact Alpha Omega for help right away.

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"Luckily I have never needed to use a restoration company, but as someone who has worked closely with Alpha Omega, they have treated my clients very well, and have always been honest and very transparent. Although their whole team is very professional and punctual, Carissa and Sonya have been great to work with."

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"Best service in town! I had water leaking through my basement ceiling from the overflow drain in my upstairs bathtub. They showed up immediately after I called, they were super professional and helped me find the leak and even told me how I can fix it myself. I was so impressed how well the turned my problem around."

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