Additional Living Expenses: What You Need to Know
One of the most valuable portions of a residential insurance policy is often overlooked when an insured purchases the policy. Living Expense coverage provides compensation to you when you are unable to live in your dwelling or home due to an insured loss or claim, while your home is being repaired. Most standard home insurance policies include coverage for additional living expenses (ALE), or loss of use, which allows you to maintain your usual lifestyle, and compensate you for the additional costs of living elsewhere when your home is destroyed or uninhabitable until it is repaired, or until the “Additional Living Expense” or ALE limit is reached on your policy. Such expenses could include limited motel, restaurant and storage costs. This coverage does not apply to flood insurance.The coverage usually continues until a reasonable time has passed for the repair of the damaged premises or, if the homeowner permanently relocates, for the shortest time required to settle the household at a new location. For instance, after a major disaster like a hurricane, your home might be uninhabitable because of other damage besides flooding, such as wind. Say, for instance, a tree blew over and crushed the roof. If your policy covers wind damage, then home insurance additional living expenses coverage would come into play.
Living Expense (ALE) Coverage is one of the provisions in most policies that is usually short and appears to be a straight forward, especially considering the language used in other sections of the same policy, but securing payment under this provision can be frustrating for insureds. The ALE portion of the policy is often construed as one of the most imprecise portions of the policy because there are no general guidelines for the insured as to how much money they will be allotted in the event of a loss, and what exactly is covered under ALE. Many times insurance policies don’t spell out a specific dollar amount the insured is entitled to under the ALE provision in a sufficient way for an insured to understand what and how much they can spend to get their family into a better situation after the loss. On an average, the majority of policies (but always check your own policy) allows for 20% of the dwelling. If you have a policy limit for your dwelling of $100k, you have $20k of ALE available to you on a regular homeowner’s policy to spend over the time it takes to get you back into your home post loss.
Wesley J. Farrell, Esq., Partner at Farrell, Patel, Jomarron & Lopez writes:
“If a loss occurs, be prepared to save all of your receipts and record all expenses so that you can properly document your ALE claim. Also, keep in mind that this coverage is based on what you “incur,” meaning you have to spend the money first before your insurance company will reimburse you. One tip we give our clients is to use one credit card so they can easily print a statement out to document their ALE expenses when they submit their insurance claim to the insurance company.”
In conclusion, ALE coverage is a useful and helpful tool to a homeowner seeking to return normalcy to life following a catastrophic event such as a hurricane. In many cases ALE coverage can help families leave shelters and move to better housing, providing the opportunity to improve a difficult situation. The coverage should be reviewed carefully by both the claims professional and the homeowner to ensure that their actions in finding new housing, decisions about repairs, and the timing of returning to the house are in accordance with the insurance coverage. The time limitation on ALE coverage can become tricky in the context of a hurricane, where it can take a longer period of time to return to the house and locate a suitable contractor and building materials. It’s important to understand the coverage you have. ALE can be complicated but knowing what an insured is entitled to and documenting expenses as “incurred” will make ALE a smooth and useful part of the homeowner’s insurance policy.