When your home is considered uninhabitable, your policy pays you for your trouble. It provides money to allow you to live somewhere else, while repairs are being made. The homeowners insurance policy will also indemnify you, for the loss of rental income on a fair value basis in most states.

Claims happen from time to time. Your home is susceptible to many perils, and hopefully you will never have to file an insurance claim. Yet if you do, understand that your homeowners insurance policy will do more than rebuild your house.

If your home is burned down, thank goodness you have a homeowners policy. Your coverage should include "The Additional Living Expense clause." This allows you to stay in a motel or move somewhere else, while your house is being repaired. The expense that you incur must be reasonable. Your homeowners insurance carrier is not going to put you in the Ritz Carlton, unless your home costs that much. It only pays for a reasonable amount of time; basically, the amount of time it takes to rebuild your house.

There is another part of the living expense equation, if you have people renting rooms in most states. The policy will offer you payment based on other rental property in the area. Your homeowners insurance will not give $1000 a month for rent, if the neighborhood average is $550. Your policy will probably subtract any expenditures, that would normally be paid, for example, the light bill.

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