Does Homeowners Insurance Cover Additional Living Expenses?
Most homeowners insurance covers additional living expenses, but only if your house is made uninhabitable after a loss caused by a peril covered by your insurance policy.
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.
Of course, you won't be able to receive compensation for any additional living costs if your insurer determines that your house is, in fact, habitable.
To see whether a certain peril is covered and if you have additional living expenses coverage, check the declaration page of your policy. If you have other questions about homeowners insurance, speak with your insurance agent about your specific policy.
Is Additional Living Expenses Coverage Included in Most Home Insurance Policies?
Yes, a standard homeowners insurance policy includes four different insurance products, each of which covers a different area of risk:
Dwelling coverage, which protects your home's interior and exterior when either are damaged or destroyed
Personal property coverage, which compensates for the loss or theft of your possessions
Liability coverage, which covers any harm or loss a visitor experiences while on your property
Additional living expenses coverage, which pays out when a covered peril makes your home suddenly uninhabitable
Calculating Additional Living Expenses Coverage
Also called "loss-of-use coverage" or "Coverage D," additional living expenses (ALE) insurance offers protection under home, townhouse, condominium and renters insurance policies. The maximum limit of your coverage is typically calculated as a percentage of your maximum dwelling limit or your overall policy's limit.
For example, if you've insured your home for $400,000 and your additional living expenses coverage is 20%, your ALE coverage will provide you with up to $80,000 in compensation for food, lodging and other expenses related to the disuse of your home. The percentage that ALE covers is usually higher for condos (50%).
Extra ALE Coverage Pays for Extra Costs
Generally speaking, your additional living expenses coverage will not fund a more costly lifestyle than the one you had before the loss event. Further, most home insurers will resist providing compensation for restaurant meals if your rental home has a kitchen. Finally, ALE will not cover your mortgage payments or your kid's piano lessons.
However, you can purchase an "actual loss sustained" rider; under this additional coverage, your homeowners insurance company will cover all reasonable expenses, perhaps even those questionable extra costs due to special circumstances. In the insurance industry, this rider varies from carrier to carrier, so ask your insurer which costs their rider covers.
How Long Does Additional Living Expense Last?
Your ALE policy will terminate when the time or the money runs out, whichever comes first. Most ALE insurance has a 12-month limit; however, some ALE coverage lasts for up to 24 months, but that duration of protection might require or additional coverage.
What Does Additional Living Expense Cover?
So, which out-of-pocket expenses does ALE insurance cover? When you've been forced to evacuate your home due to a covered peril, most policies will pay for the following additional living expenses:
Storage costs for your personal property
Temporary rental home or apartment
Utility bills associated with your temporary housing
Everyday food budget
Increased fuel costs as a result of the homeowner's displacement
Dry cleaning and laundry service
Pet boarding, which includes horses and livestock
Rent a tenant would have paid you had the damage not occurred
Photocopies and mailing expenses related to your claim
Cost to secure your damaged or destroyed home
Cable, telephone and utility reconnection fees at your rebuilt home
Additional living expenses coverage varies from insurance policy to insurance policy and from insurance company to insurance company, so it's always a good idea to go over the details of your ALE coverage with your insurer.
When Will My Insurance Company Pay for Costs?
After the loss event, homeowners will typically receive an advance payment, and additional expenses are paid as they arise. In other words, you'll get paid a lump-sum of money upfront, with allowances for more expenses until you reach the coverage limit.
Additional Living Expenses Worksheet
After your additional living expenses coverage kicks in, your insurer will provide you with an additional living expenses worksheet. This document allows you to itemize your extra expenses: for example, the cost of your temporary home, extra fuel and other expenses.
For baseline-comparison purposes, many worksheets will ask you to itemize your average expenses before the covered loss.
Tracking Additional Living Expenses
One of this article's key takeaways about ALE homeowners insurance is that, in order to file a claim, you must keep a meticulous, precise and thorough record of all your expenditures, saving and safely storing each and every receipt.
Most home insurance companies will not honor an ALE claim without proper documentation of your pre-disaster costs and your post-disaster costs; indeed, without this personal finance record, how can insurers determine what constitutes your "extra expenses"? You've got to document and verify your additional costs in the same way you have to document and verify your home inventory. The technology marketplace offers personal-finance trackers, including QuickBooks, Abacus, Claritus, Personal Capital, Mint, Mobills, and Prism, among others.
If you have any special expenses that fall into a gray area, you should ask your insurance company about these additional costs and get your carrier's approval in writing.
What's Not Covered by ALE Coverage
Your ALE insurance policy can only be used when you've been forced to leave your home due to a peril covered under your homeowners insurance policy, such as:
Vandalism and mob violence
Water damage from burst pipes
Damage due to the weight of ice, snow or sleet
However, there are many perils that most homeowners policies do not cover: flooding, earthquakes and other natural disasters and damage due to infestations. It's always a good idea to review the exclusions in a homeowners insurance policy.
Compare Additional Living Expenses Coverage, Save on Homeowners Insurance
It's always a good idea to see what kind of homeowners insurance rates are available to you. 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.
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