Additional Living Expenses: Everything You Need To Know
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Most insurance companies will consider your home to be uninhabitable if it has no water, no heat, no electricity or the plumbing is not functional. Most homeowners insurance covers additional living expenses if your home is made uninhabitable after a loss caused by a peril covered by your insurance policy. Additional living expense (ALE) coverage on your home insurance reimburses homeowners for the difference between what they would normally spend on living expenses and expenses they incurred while displaced. To see whether a certain peril is covered on your policy and if you have additional living expenses coverage, check the declaration page of your policy jacket. If you have other questions about homeowners insurance, speak with your insurance agent about your specific policy.
What Is Additional Living Expenses Insurance?
Additional living expense (ALE) insurance is covered under homeowners, condo or renters insurance. It includes additional costs of living incurred by a policyholder if they are temporarily relocated from their dwelling after a covered event. Common events that could trigger ALE coverage include:
- Smoke damage
- Snow or ice damage
- Falling objects
- Water damage from a burst pipe
You’ll find that many renters or homeowners insurance include ALE, which you can use to cover restaurant meals, hotel stays and other costs that are a result of being away from home while it is being repaired or rebuilt.
How Much Is Covered Under ALE?
If you have a homeowners policy, your ALE coverage will likely be around 20% to 30% of your home coverage. If your house is insured for $300,000, you would be entitled to around $60,000 in ALE coverage.
How Does Additional Living Expenses Coverage Work?
Additional living expense insurance can cover things like restaurant meals, hotel stays and pet boarding. ALE is designed to cover you for any extra expenses incurred by being temporarily displaced from your dwelling. For example, if a fire makes your house uninhabitable, you and your family would have to find a hotel or rental to live in while your house is being repaired. ALE coverage will help you stay somewhere else until you are able to return to your home.
ALE will only cover additional living costs that are a result of damage caused by a covered peril. Insurers will not accept a claim if you want to rent out a place that is much higher than your normal apartment.
ALE coverage is calculated as a percentage of either the value of personal property within a renters insurance policy or the dwelling limit amount (for homeowner policies). If you rent, ALE is meant to cover the difference between what you would normally pay in rent and what you now have to pay. Your insurer will likely perform a market analysis of the current monthly rent for a rental or furnished home that is comparable to the damaged unit.
If you own your home, you would need to continue paying your mortgage, real estate taxes and homeowners insurance payments as usual, even after a loss occurs — ALE will not cover these expenses, only the additional ones. Your additional living expense limit is typically a percentage (typically 20% to 30%) of your dwelling coverage limit, according to your policy. Check with your insurer to determine your ALE limit.
It’s important to know that ALE insurance works on a reimbursement basis. You may still have to pay for your meals and hotel stays. By saving your receipts you will be able to be reimbursed. You may or may not be fully reimbursed.
What Is an Additional Living Expense in Homeowners Insurance?
ALE is a standard part of a homeowners insurance policy, but there are limits to what it will cover. Homeowners insurance often sets time or dollar limits on ALE in the policy and sometimes both. ALE may cover:
- Restaurant meals: Since you don’t have access to a kitchen and will need to eat out more, ALE can help.
- Hotels and rentals: These accommodations should be comparable to your lifestyle. Your insurer may try to place you in a nice quality residence that gives you access to a kitchen.
- Furniture rentals: If you need a work desk or a special item that you are accustomed to having, ALE may be able to help.
- Laundry costs: You may be covered if you have to send your laundry out since you cannot use your washer and dryer.
- Storage costs: You can claim expenses if you have to store your items from home.
- Pet boarding: If you have to board your pets while you stay in a hotel, your insurer may be able to help.
- Moving costs: You may have to rent a van, buy moving boxes or tape to move.
- Mileage: If your rental is far from your home, you can claim mileage expenses for the extra distance you have to drive.
- Utility expenses that are higher than what you usually pay.
- Differences between your normal rent costs and your temporary rental.
- Credit card fees or application fees by the management company of your temporary rental.
- Cell phone overtime charges if you have lost your landline phone.
- Sewage fee or IT fee at the temporary rental home.
- Cable, telephone and utility reconnection fees at your rebuilt home.
- Photocopies and mailing expenses related to your claim.
- Rental cars.
- Daycare expenses.
Are There Limits to ALE Coverage?
Some insurance policies have a time limit, while others have a dollar limit. These limits are separate from the coverage you get to repair your home.
How Much ALE Coverage Does Homeowners Policy Provide?
Depending on your insurer, ALE coverage is typically 20% to 30% of your policy’s dwelling coverage limit. ALE coverage that is typically available to policyholders is limited to:
Percentage of Dwelling Limit
HO-4 (Renters insurance)
These are basic guidelines — your coverage may vary depending on your insurer.
Are There Limits to ALE Coverage With Renters Insurance?
Renters policies — also known as an HO-4 policy — offer ALE coverage limits that usually run around 30% of personal property limits. ALE insurance includes restaurant meals, hotel bills and other expenses. The maximum dollar limit (usually between 10 and 30%) is based on your renters insurance policy's coverage amount. Your insurer can clarify the dollar limit in your policy if you’re uncertain.
What Doesn’t Additional Living Expense Insurance Cover?
You can file a claim for additional living expenses only for damage that is covered by your homeowners insurance policy. It’s important to note that additional living expense insurance doesn’t cover floods unless you have a private flood policy that specifically has ALE coverage. Earthquakes are also not covered by homeowners insurance, so ALE won’t be offered after quake damage. You would have to purchase private earthquake insurance or add it as a rider to your current insurance policy to be covered for related expenses.
ALE coverage will not cover the following:
- Normal wear and tear
- Pest infestations
- Neglect or preventable damage
ALE coverage will not cover property damage, mortgage payments, electric bills or other ongoing costs for your property. Most policies will not reimburse you for the cost of replacing damaged or lost personal belongings.
How Long Does ALE Coverage Last?
Most homeowners insurance carriers will place a time limit on how long ALE coverage after a peril. This “period of restoration” varies by carrier, but it commonly is set around 12 months but can go as long as 24 months. Some insurers may allow you to buy additional coverage to protect you for an additional length of time.
Each policy can be different, especially if you have a condo or renters policy, so it’s a good idea to ask your insurer questions.
How To File an Additional Living Expense Claim
If your home, condo or apartment is damaged to the point that it is uninhabitable, you should call your insurer immediately. At this stage, documentation and receipts are critical in order to have a smooth claim and reimbursement process. Your insurer will help you find temporary housing and explain your reimbursement options available to you. Once your insurer has explained their policies and procedures, it should be easy to navigate through your claim and receive your reimbursement as soon as possible.
Compare Additional Living Expenses Coverage, Save on Homeowners Insurance
ALE insurance is designed to allow you to live as closely as possible to the same standard that you enjoyed before a covered event. Therefore, the amount of dwelling coverage you have directly impacts the coverage limits of your ALE. You may be interested in a more cost-effective policy with wider coverage limits. SmartFinancial can help you find the highest-quality homeowners coverage at the lowest prices. Begin a free quote by entering your zip code below. We'll then pair you with a reliable insurance agent in your area who can help you with all your homeowners insurance questions.