Additional Living Expense
Deductible May Apply
Alice Yao | Updated August 21st, 2020
Just like its name, additional living expenses (ALE), also commonly known as loss of use, provides reimbursement to cover extra living costs in the events that your home is not livable due to fire or other covered perils.
This coverage is one of the six main components of homeowners insurance policy and provides essential benefits to homeowners for unexpected costs such as hotel stays and storage units.
In this article, we will go over these topics:
- What does ALE coverage provide?
- How is the reimbursement amount determined?
- How much coverage does ALE provide?
What does ALE coverage provide?
In the event that a covered loss occurs, ALE will take care of additional expenses related to the following:
- Temporary housing costs such as hotel or rental home
- Additional expenses for food and utility charge
- Additional transportation costs due to temporary relocation
- Pet boarding cost
- Moving cost
Fair rental income
If part of your home was rented out prior to a covered loss, you may be reimbursed as part of your standard homeowners policy. Some companies may require you to add a specific endorsement onto your homeowners policy in order to include this benefit.
ALE coverage will typically cover up to 12 months of rental income loss.
How is the reimbursement amount determined?
On some policies, a predetermined fixed daily limit is specified to cover daily expenses. On other policies, there is no specified daily limit, but rather a specified period of time. When there is no total coverage limit or daily limit specified on the policy, the claim adjuster reviews each case at the time of a loss and approves additional living expenses based on what is considered reasonable for each customer.
In the process of establishing reasonable expenses, insurance companies will consider factors such as convenience of location and reasonable accommodations into their approval of reimbursements.
After a pipe burst in a customer's home that caused water to flood the entire first floor, a mitigation company was called for restoration. A team of specialists arrived with shop vacuums and commercial fans to remove water and dry out any moisture in-between walls and floors.
For moisture to be completely removed, the equipment has to be actively working non-stop for several days. During this time, not only was the noise level very high in the customer's home, but the kitchen and bathrooms were also unusable due to water shutoff.
Fortunately, the claim adjuster on this case quickly approved an immediate hotel accommodation, and our customer and his family were able to move forward with their daily activities.
Factors such as reasonable accommodations, convenience of location, access to necessary amenities and will be taken into consideration during the approval process.
If you were planning to stay at the Four Seasons Hotel that is located 10 miles away from your home compared to the Hilton Garden Inn that is a mile away because your house is not livable from a covered loss, there is a high chance that a portion of the hotel costs would not be approved.
Using the same example above, during the week that you and your family are staying at the hotel, you order meals from room service or eat out at local restaurants. This resulted in an extra $300 in food expenses compared to when you bought groceries and cooked at home in a normal week prior to the loss. Your ALE can also cover the extra $300 you spent on meal expenses. Your claim adjuster will request to see meal receipts and room service invoices. It is always important to log all expenses, no matter how small the amount is. In our experience, the easiest way to track receipts is to take pictures of them using your smartphone. You may also consider using a basic notes app on your phone to reference these expenses, or even text or email yourself with the notes.
Another line item that is commonly covered under ALE is extra mileage or transportation expenses. When your house suffers a major loss and requires at least a few months of construction repair work, your family will have to move into a rental home or condo during the time that may be located further from work or school requiring more transportation costs.
Note that ALE coverage will take care of any extra costs of having to live away from your home due to a covered peril, but it will not cover your normal daily living expenses.
How much coverage does ALE provide?
Your homeowners, condo, or renters policy will indicate how much and/or how long you are covered under your additional living expenses coverage. On most policies, the specified time period of coverage is 24 months.
If your policy does indicate a coverage amount limit, it is vital to review and adjust this coverage amount to account for fluctuation in costs of living within your area.
In the case where you have both a coverage limit and a specified time period listed on your policy, when the total coverage amount is exhausted or the time period is expired prior to the completion of repairs or reconstruction on your home, you would be responsible for any additional living expenses from that point on.
For example, if your policy indicates a total ALE coverage amount of $95,000 and a time period of 24 months, then coverage is afforded until one or the other limit is reached.
Keep in mind, only one deductible will apply to your claim so once you have met the deductible amount, you should be reimbursed at the fully approved amount by your claim adjuster.
Be sure to discuss your ALE coverage in detail with your insurance agent during your policy review. This will ensure you are properly and adequately covered in the event of a claim.
By Alice Yao |