The Costly Coverage Gap No One Talks About

Most homeowners think of insurance as a safety net—a way to restore their home and belongings after disaster strikes. But what happens when the home is gone, and you have nowhere to live? When weeks turn into months, and months stretch into years?

Loss of Use coverage (also called Additional Living Expenses or ALE) is supposed to keep you afloat during this time. But here’s the problem—many policies aren’t built for reality, especially for high-net-worth homeowners. If you think your coverage will automatically keep pace with the actual time it takes to rebuild, it’s time for a serious gut check.

Rebuilding Takes Longer Than You Think

In our last article, we talked about Guaranteed Replacement Cost—making sure your home gets rebuilt, no matter what. But that’s just half the battle. Because even if your insurer covers the full rebuild, where do you live while you wait?

For luxury homes, that wait isn’t just a few months. Custom materials, intricate designs, specialized contractors—it all adds up to a process that can take two to three years. That’s if everything goes smoothly. The catch? Many standard policies only cover Additional Living Expenses for 12 to 24 months. And once that clock runs out, the cost of living falls squarely on your shoulders.

The True Cost of Temporary Living

Let’s talk numbers. If you lose your home, you’re not just crashing at a hotel for a few weeks. Finding a comparable rental in high-value markets means shelling out anywhere from $20,000 to $50,000 a month—sometimes more. Add in furniture rentals, storage, increased commuting costs, and everything else that comes with an unexpected move, and it’s easy to burn through a restrictive policy limit in no time.

Now, imagine hitting that limit when your rebuild isn’t even close to being done. Do you dip into savings? Take on additional debt? Settle for a rental that doesn’t meet your needs? None of those are great options, but that’s the reality for homeowners who assume their policy has them covered when it doesn’t.

Bill Wilson, insurance expert and author of When Words Collide: Resolving Insurance Coverage and Claims Disputes, has seen this scenario play out countless times. “Most people don’t know how much their temporary housing will actually cost until they’re in the middle of a crisis. That’s not the time to realize your policy isn’t enough.”

A good recent example of this issue is the time it will take to rebuild in Georgia and North Carolina following Hurricane Helene. We are almost six months past the event date and for many of the affected homes the rebuilding either has yet to begin. With many of the insurance policies only allowing 12 months for additional living expenses the majority of these residents will be paying out of pocket for the remainder of the time it will take to rebuild their homes. If the cost of a rental property was $10,000 per month, this could easily be a $100,000 shortage compared to an insurance policy that adequately meets their needs.

The Overlooked Costs You Should Plan For

Mass-market policies tend to limit loss of use coverage in one of two ways: either by capping the total dollar amount or restricting the timeframe, often to 12 or 24 months. But here’s the issue—these policies don’t account for real-life nuances that should be factored into your temporary living situation.

For example, will the rental home be in your child’s current school district? Is it on their bus route? Will it allow you to maintain the standard of living you’re used to? Policies that only focus on cost, without considering the full impact of displacement, often leave homeowners with difficult choices that go beyond financial strain. Loretta Worters, Vice President of the Insurance Information Institute, warns that “many homeowners focus only on housing costs, but the financial strain goes far beyond rent. The right policy should factor in all aspects of temporary living expenses.”

When evaluating your coverage, it’s critical to consider the full scope of your needs—not just the obvious ones.

How to Protect Yourself Before It’s Too Late

1. Check Your Policy Limits – Don’t assume. Look at the fine print and see exactly how much ALE coverage you have—and how long it lasts.
2. Compare It to Reality – What does a comparable rental actually cost in your area? Would your current coverage hold up in today’s market?
3. Ask About Extended ALE Options – Some policies allow for extended timelines or increased coverage amounts. If yours doesn’t, it might be time to upgrade.
4. Look Into Cash-Out Options – Some insurers offer a lump sum payout instead of sticking to rigid reimbursement rules. This can give you more control should you decide it is better to take the cash and rebuild elsewhere.

The Bottom Line

A home insurance policy isn’t just about rebuilding—it’s about making sure you can maintain your lifestyle while you wait. The time to ask these questions isn’t after disaster strikes; it’s now.

At Townley Kenton, we believe in insurance that works in real life, not just on paper. If you’re unsure whether your policy has your back, let’s talk. Because the worst time to find out your coverage isn’t enough is when you need it the most.

Sources

Wilson, Bill. When Words Collide: Resolving Insurance Coverage and Claims Disputes.  https://www.insurancecommentary.com/when-words-collide

Worters, Loretta. Vice President, Insurance Information Institute. https://www.iii.org/about-us/media-center/loretta-worters