Loss of Use Coverage for Commercial Properties: Understanding Time Limits, Extensions, and Actual Loss Sustained
When a commercial property or apartment building is damaged by a covered loss, repairs can take time. During that period, rental income or business income may be interrupted — even though expenses such as mortgages, taxes, and insurance continue.
Loss of use coverage, sometimes referred to as loss of rental income, business income, or business interruption, is designed to help address that gap. However, the way this coverage is structured — including how long it lasts and how it is paid — can vary significantly by policy and insurance company.
What Is Loss of Use Coverage?
Loss of use coverage is intended to help replace income that would have been earned if a covered loss had not occurred. For apartment owners, this is often rental income. For larger commercial properties, it may be business income generated by tenants or operations.
Coverage applies only when a property becomes partially or fully unusable due to a covered peril, such as fire or certain types of storm damage.
Typical Time Limits on Loss of Use Coverage
One of the most common misconceptions is that loss of use coverage lasts indefinitely. In reality, most policies place limits on how long coverage applies.
Many commercial and apartment owners policies:
- Limit coverage to a defined restoration period
- Stop coverage once the property is repaired and usable
- Include a maximum time cap, often up to 12 months
Delays caused by permitting, contractor availability, redesigns, or upgrades beyond repairs may not extend coverage.
Extended Loss of Use Coverage
Some insurance companies allow property owners to purchase extended loss of use coverage beyond the standard time period, such as extending coverage beyond 12 months.
This option may be valuable for:
- Larger apartment buildings
- Complex commercial properties
- Properties where repairs may take longer due to size or construction type
Extended coverage is not available from all insurers and may be subject to additional underwriting requirements, limits, or conditions.
Actual Loss Sustained (ALS) Coverage
Some policies offer loss of use coverage on an Actual Loss Sustained (ALS) basis rather than a fixed dollar amount.
With ALS coverage, the policy may reimburse actual lost income during the covered restoration period, up to the time limit stated in the policy, rather than being capped at a specific dollar limit.
Key points to understand about ALS coverage:
- Coverage is still subject to a time limit
- Documentation of income is required
- Not all policies or insurers offer ALS options
ALS coverage can offer flexibility, but it does not eliminate policy conditions or exclusions.
Dollar Limits vs. Actual Loss Sustained
Loss of use coverage may be structured in different ways:
- Dollar limit: Coverage stops once the stated limit is reached, even if the restoration period is not complete
- Actual Loss Sustained: Coverage is based on documented income loss during the covered time period
The appropriate structure depends on the property, income level, and risk tolerance of the owner.
Availability and Policy Wording Varies
Loss of use coverage — including extensions and ALS options — is not standardized.
Important considerations include:
- Not all insurance companies offer extended loss of use coverage
- Actual Loss Sustained wording varies by insurer
- Time limits, exclusions, and documentation requirements differ by policy
This is why reviewing policy language before a loss occurs is critical.
Loss of Use Coverage for Apartments and Commercial Properties
Apartment buildings may be insured under apartment owners, rental property, or commercial property policies, depending on size and structure. Larger or mixed-use properties are often insured under commercial property policies or Business Owners Policies (BOPs).
Each structure handles loss of use coverage differently.
👉 Learn more about Commercial Property Insurance
👉 Learn more about Apartment Owners Insurance
Guidance from Risman Insurance Agencies
Risman Insurance Agencies helps Massachusetts property owners review apartment owners and commercial property policies, including loss of use options such as extended coverage and Actual Loss Sustained provisions.
We can help explain how coverage is structured, what options may be available, and how policy wording affects claim outcomes.
Insurance coverage cannot be added, deleted, or changed until confirmed in writing from our office.
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