Additional Living Expenses (ALE) Coverage in a Claim

We frequently hear stories about people being evicted from their homes after they became uninhabitable. In many cases, this occurs following a fire, a storm, or another natural disaster.

Additional living expense (ALE) coverage, if you have home, condo, or renter's insurance, keeps you from being "homeless." It can help you avoid couch surfing at your in-laws' or friends' houses while you wait for repairs.

Here are some of the main reasons for this coverage and how it works.

What Is Additional Living Expenses Coverage?

Additional living expense (ALE) insurance can be purchased in conjunction with homeowners, renter's, or condo owner insurance. ALE coverage compensates you if you are unable to live in your home due to an insured loss or claim and your home is being repaired.

When your home is destroyed or uninhabitable, ALE provides you with money to maintain your normal lifestyle and compensates you for the additional costs of living elsewhere. The coverage is in effect until your home is repaired or the policy limit is reached.

Aside from the monetary coverage, the policy allows you to maintain your independence and privacy in your temporary residence. This coverage, in turn, can alleviate a significant amount of financial stress for you and your family.

When Can You Claim ALE?

You can only file an ALE claim if your home is rendered uninhabitable as a result of a loss caused by a risk covered by your insurance policy. Home repairs can make your life inconvenient at times. You might prefer to stay in a hotel instead.

You should not assume that going to a hotel is covered by your policy. Payment for living expenses must be approved by an insurance company. The reason for leaving must be directly related to the insurance claim. For example, the criteria for approval could include a lack of running water or electricity. These are the kinds of things that can make a house uninhabitable.

Having some basement repairs done for a week after water damage or a sewer backup may not qualify. If you had half of your roof repaired following a storm but still had heat, electricity, and water, your provider may deny your ALE claim.

How Does ALE Work?

ALE will only cover your additional living expenses. These are only reimbursable if they exceed your standard costs as a result of the damage to your home. The covered amount is determined by the extra expenses.

For example, suppose you pay $500 per month in rent. Because of a fire in your building, your landlord says you don't have to worry about paying rent until the apartment is habitable again. You are not spending $500 on living expenses at that time.

You find short-term lodging of comparable quality and location for $900 per month. In that case, your additional living expense is $400, not $900.

Assume you decide to live a little more luxuriously as a result of the difficult situation while you wait for your place to be ready. Instead of the $900 flat, a top-floor unit with a nice view is available for $1,300 per month.

Your claim will be reviewed by the insurance company. They will notice that you have not found a substitute for your current standard of living. They may only agree to pay $900 for the apartment. Then you would only receive $400 for additional living expenses during the month you were away from home.

Additional Coverage

To maintain your lifestyle, an insurance company may consider paying for the following items in an ALE claim if it makes sense:

  • Restaurant meals
  • Increased mileage or transportation costs due to your temporary location
  • Costs for your temporary accommodation, such as a rental, a hotel, a motel, or a room in a boarding house
  • Laundry expenses if you don't have access to a washer and dryer at your temporary home
  • Renting special items you are used to having
  • Storage costs for contents under special circumstances
  • Moving or displacement costs
  • Pet boarding

ALE is intended to cover the difference between regular expenses and what you must pay temporarily due to circumstances beyond your control. Your insurer will always evaluate the expenses you're claiming. It will then compare them to your typical lifestyle expenses.

The insurance adjuster will make similar assessments as in the case of the tenant renting.

Reimbursed Amount

When claiming ALE, it is easy to get confused about how much money you will receive. The last thing you want to do is begin spending extra money only to discover that you are only receiving half of it back.

The good news is that most insurers have extensive networks and resources to assist you in finding a similar home or rental to the one you've been living in.

The adjuster will frequently present you with options that will meet your ALE limits. They will also talk about how long your policy will cover the ALE.

What Is the Limit on ALE?

Depending on your policy form and type, the ALE limit is frequently:

  • On standard homeowner policies, this is approximately 30% of the dwelling limit amount.
  • On condo policies, around half of the personal property or insured contents amount is covered.
  • A standard tenant policy's personal property or contents limit is approximately 30%.

These are just a few examples of what an ALE limit might look like. The key here is to understand your limit. It is frequently found on the declaration page of your insurance policy.

There are policies with higher thresholds. Based on their criteria, insurers may decide to raise ALE limits.

Restaurant Expenses

Restaurant costs are a common but misunderstood ALE expense. Always ask your adjuster how you'll be reimbursed and what a reasonable amount per meal is. Insurance companies frequently have guidelines for eating out.

Assume Mary and Joe are fans of fine dining. Joe is a fantastic chef who always keeps high-quality meats and seafood on hand and cooks delicious meals every day. Because Mary and Joe's house is being repaired, they have relocated to a temporary rental home with a full kitchen. They eat out a few times and then submit the receipts to the insurance company for reimbursement.

The bills are being challenged by the insurer. The meals total more than $200, which exceeds their ALE allowance. Joe explains that they enjoy eating well and are accustomed to high-end cuisine at home. The adjuster was aware of this information about these clients. That is why they placed them in a well-equipped home with excellent kitchen amenities.

Unfortunately, Joe's explanation for their increased living expenses does not hold water in this case. The clients were provided with all of the same cooking amenities that they had at home. Eating at their favorite restaurants was not an added expense caused by being away from home.

In this case, the insurer was within its rights to pay the normal food allowance up to the point where it exceeded their normal grocery costs. Because they didn't understand the coverage, Joe and Mary were forced to pay out of pocket.

4 Ways to Make Sure You Get Maximum Benefits Paid

  1. Make sure you have receipts for all of your expenses.
  2. Document how the expenses differ from your normal expenses.
  3. Provide proof of your normal expenses, which the insurance company can use as a comparison point if things are questioned.
  4. To avoid misunderstandings, obtain written authorization from the insurance company for any special expenses.

There's nothing wrong with having fun and making the best of a bad situation; it's just important to know what you're getting into. Always ask your adjuster to explain how expenses will be covered if you are unsure. You won't have to foot the bill this way.