Where Will You Live If Your House is Destroyed, and How Much Will It Cost?

Where will you live?

When a house is destroyed, the people who lived in it naturally think about the lost possessions. They think of lost furniture, clothes, photos, entertainment systems, and so on. And then the realization sets in: They have to find another place to live. Will it cost more to live there than they're used to paying?

Sometimes people are put out of their homes temporarily. For example, a severe windstorm may blow a tree down and leave it on (and in) the house's roof. No one will be able to use the upstairs until that tree is removed and the damage repaired. Similarly, flood waters on the first floor may render the entire home uninhabitable. Until the water is pumped out and repairs made, the occupants will have to live elsewhere. These temporary dislocations may last anywhere from a few days to a month or two. It depends on the extent of the damage and whether contractors are available to do the work.

In more severe events, the occupants may never be able to return to the home. Every summer, wildfires in the western states burn homes to their foundations, leaving nothing for the owners to return to. Some catastrophic weather events, like the tornado that hit Joplin, Missouri in 2011 or Hurricane Katrina in 2005, left rubble where the houses had been. Occupants of these homes had to relocate permanently or at least temporarily while they rebuilt.

Depending on what happened, it may be difficult to find a new place to live. If the incident was isolated to a few properties, finding temporary homes should be relatively simple. For example, if one home burned down or a few homes in one neighborhood suffered flood damage, there should be short-term apartment and hotel room vacancies nearby.

If a widespread catastrophic event occurred, such as a hurricane or extensive flooding, displaced residents may find themselves competing with one another for a fixed number of vacancies. The less expensive places will rent out quickly, leaving those affected to choose from rooms that are more expensive, some distance away from their original homes, or both. Superstorm Sandy in 2012 left thousands of people in this situation.

Most homeowners' and renters' insurance policies provide "loss of use" or "additional living expense" coverage to help their policyholders cope at times like this. It pays the difference between the residents' normal monthly housing cost and the cost of the replacement quarters. For example, if a family was paying $1,000 a month for rent, and their temporary apartment costs $1,500, the insurance will cover the additional $500.

Homeowners policies do not cover all events, however. They do not cover flood or earthquake damage, for example. If a flood drives a family out of its home, the insurance will not help them rent a more expensive residence.

If you are unsure whether you have this coverage, talk to your insurance agent. Losing your home, even for a few weeks or months, is a shock. Having insurance to help you get through will make the blow a little easier to take.