Home insurance will pay for your additional living expenses if you can’t live at home due to a covered loss. There are home insurance additional living expenses coverage, and its important that you keep receipts as you’ll need to submit them for reimbursement.
If a disaster leaves your home uninhabitable, where will you live and how will you pay for it?
Additional living expenses, or ALE, is a form of coverage included in homeowners and renters insurance policies that provides some coverage for you to live elsewhere while your home is being repaired or rebuilt.
Additional living expenses coverage also kicks in if your family is under a mandatory evacuation order due to a covered peril, such as a fire, tornado or hurricane.
“Most policies will reimburse you the difference between your additional living expenses and your normal living expenses,” says Carole Walker, executive director of the Rocky Mountain Insurance Information Association. “But policies have set limits on the amount they will pay and may be subject to a deductible.”
KEY TAKEAWAYS
- Standard home insurance policies include additional living expenses (ALE) coverage.
- ALE pays the additional costs you incur while you can’t live at home, including hotels and dining out.
- Additional living expenses are paid by your insurance company on a reimbursement basis, so it’s important to keep all receipts.
What is additional living expenses coverage?
Additional living expenses coverage, also called ALE insurance or loss of use coverage, reimburses you for extra expenses that you incur if you can’t live in your home due to a covered loss. For example, if a tornado or hurricane wrecks your home and temporarily makes it uninhabitable, ALE insurance will reimburse costs, such as:
- Hotel bills
- Restaurant meals
- Rent you would have collected from a tenant had the damage not occurred
The amount you’re reimbursed is the difference between your normal living expenses and these additional costs.
Many people don’t even realize they have additional living expenses as part of their homeowners or renters insurance policy, Walker says. But this coverage can come through for them when they need it most.
“Imagine being forced out of your home on a moment’s notice due to an evacuation order, water damage, fire,” she says. “Could you afford to temporarily live elsewhere with the understanding that you are still responsible for your mortgage, utilities and other household expenses?”
What does additional living expenses insurance cover?
What is covered under additional living expense? ALE covers a hotel stay and any costs you incur you might incur while your home is uninhabitable and is being repaired or rebuilt. The coverage to keep a temporary home is meant to maintain your standard of living, so ALE coverage likely won’t pick up a week of staying at the Ritz. Instead, home insurers expect you to maintain your current standard of living.
Covered costs include those that exceed your normal living expenses. ALE might reimburse you for things such as:
- Hotel or temporary rental costs
- Restaurant meals
- Boarding costs for a pet
- Storage fees
- Washer and dryer costs
- Pet boarding
- Mileage
- Rent you would have collected if a tenant was still able to live at the property
What isn’t covered by additional living expense?
Additional living expenses can include things like temporary housing, storage fees, and meals. However, there are some expenses that additional living expense coverage does not cover. For example, most policies will not reimburse you for the cost of replacing lost or damaged personal belongings. It’s important to be familiar with your additional living expense coverage before something happens and you need to use it.
When can you make a claim on your additional living expense coverage?
You can only claim additional living expense coverage if your home becomes uninhabitable after a loss that’s covered by your insurance policy.
It won’t cover you if you’re having voluntary work done on your home, like renovations or additions.
What is the limit of additional living expenses?
The limit is typically a percentage of your homeowners insurance dwelling coverage.
For example, your ALE coverage might have a ceiling of 20% of the dwelling limit. That means if you have $200,000 of dwelling coverage, your additional living expenses coverage might be $40,000.
Additional living expenses examples
Typically, additional living expense coverage will reimburse you for any costs related to a peril listed in your insurance policy that damages your home.
“This money is designed to cover your extra out-of-pocket expenses for hotels or temporary housing, car rentals and other expenses you may incur while your home is being repaired,” Walker says.
For example, if a fire sweeps through your home and burns it to the ground, ALE coverage will help cover your daily living costs while the home is rebuilt. Or, if a buildup of snow causes your roof to collapse, ALE coverage can again reimburse your costs.
Other examples of covered perils that might create damage that causes ALE coverage to kick in include:
- Hurricanes
- Water damage from a burst pipe
- Vandalism
- Explosions
Home insurance policies typically include up to 12 months of additional living expenses, but some offer up to 24 months as either part of the policy or as a purchase option, Walker says.
Longer coverage can be valuable in some situations. “If you live in a high-risk wildfire or catastrophe area, it’s important to consider it may take a longer amount of time to repair or rebuild your home after a disaster,” Walker says.
Additional living expenses worksheet
An additional living expenses worksheet might be broken into categories of expenses, such as:
- Housing
- Utilities
- Meals
- Transportation
- Miscellaneous, including things such a laundry costs
Under each of these general headings would be individual expenses. For example, under the “Utilities” heading, you might include individual entries for everything from gas and water to internet and cable TV costs.
You would note both the cost incurred and how much additional expense you incurred for each of those costs.
ALE doesn’t cover all costs while you’re out of your home, though. Don’t expect additional living expenses coverage to pay your mortgage or for the kids’ music lessons. The coverage pays only for expenses you wouldn’t have incurred had disaster not struck.
In fact, any money you save from living in a temporary place is deducted from the reimbursement. Don’t be surprised, for instance, if the insurer subtracts the amount you would normally have spent on groceries from the reimbursement amount for restaurant meals while you’re at the hotel.
Or if you pay less for utilities at your rental home than you paid at your own house, then that savings will be subtracted from the amount you’re reimbursed for additional living expenses.
“ALE is designed to pay for out-of-pocket expenses and temporary housing similar to your current home,” Walker says. “In other words, ALE will not pay for a five-star hotel or expensive dining tabs that aren’t equal to your normal day-to-day expenses.”
How does an additional living expenses cash advance work?
Unless you have a lot of savings, you might need a cash advance from your insurance company just to pay your bills. But getting such a check via your additional living expenses coverage isn’t always easy.
“Many insurers will give payment advances, but it’s patchy,” says Amy Bach, executive director of United Policyholders. How to get the additional living expenses cash out? “You need to ask for it, and if the adjuster says no, you need to push a little more and go up the chain.”
Fortunately, insurance companies generally reimburse for expenses as they are incurred, so you don’t have to wait to receive a lump-sum check at the end of the process.
Keep meticulous records of every expenditure, and save all your receipts. Get a waterproof, zippered pouch to keep them together.
“Without receipts, you don’t get payment,” Bach says.
How to make additional living expense (ALE) coverage claims
If your home is damaged to the point where you no longer can live in it, call your insurance company promptly.
“It’s critical that one of your first calls after evacuating or suffering a loss is to your insurance carrier,” Walker says.
You should document your discussions — from the first time you call your insurance company to verify your ALE coverage. Grab a notebook or put your notes in your cellphone and jot down who you talked to, the date, the time and details you discussed. Documentation can be critical to having a smooth claim process.
An agent or representative will help you better understand what your insurance covers under ALE and the step-by-step process for filing your claim.
Your insurer also can help you find temporary housing and explain the reimbursement options that are available to you.
Closely follow the policies and procedures that your insurer has put into place for making a claim. Doing so can help prevent unnecessary difficulties in getting your reimbursement.
“ALE is typically a separate insurance check from your home repair or personal contents claim payment,” Walker says.
Frequently asked questions: Additional living expenses
Is additional living expenses the same as loss of use?
Yes, “additional living expenses” and “loss of use coverage” are the same thing. They are both part of what is known as “Coverage D” in your homeowners insurance or renters insurance policy.
So the additional living expenses definition is the same as it is for loss of use.
Can you get loss of use reimbursement from an insurance company when staying with a friend or relative?
Yes, it’s possible to still get loss-of-use reimbursement when staying with a friend or relative. Some costs may still be reimbursed so long as you have been forced to live elsewhere due to a covered loss, Walker says.
She also notes that your ALE coverage may be subject to a deductible before the coverage kicks in. So, living with a friend or relatives might help you save on overall costs by preventing you from having to make an ALE claim at all.
And even if your losses are steep enough that you have to use your policy — and pay your deductible — staying with friends and relatives can still save you money since your ALE coverage likely has limits that you do not want to exceed.
“Staying with friends or relatives may help you save on expenses that may not be covered,” Walker says.
Does homeowners insurance cover temporary housing?
Many homeowners insurance policies cover temporary living expenses, which is also known as loss-of-use coverage or Coverage D. It kicks in if your home is uninhabitable due to damages.
However, it is important to check with your insurance provider to see what is covered under your policy. Some insurers only cover certain types of damages, such as fire or weather-related damages. As a result, it is important to be familiar with the details of your homeowners insurance policy.
Does homeowners insurance cover a hotel stay?
Yes, most homeowners insurance policies will cover the cost of a hotel stay if your home is uninhabitable due to a covered event, such as a fire or severe weather. However, coverage varies from policy to policy.
Generally speaking, your homeowners insurance will pay for a hotel room up to the limit specified in your policy for additional living expenses. This coverage is typically a percentage of the overall homeowners insurance policy.
To read the full article, click here.