Additional Living Expenses (ALE) Coverage in a Claim
We often hear about stories where people are put out into the street after a disaster, whether after a fire in an apartment building for renters; or for homeowners or condo owners after massive property damages from storms or other insured risks and disasters.
When you have a home, condo, or renter insurance, Additional Living Expense (ALE) coverage prevents you from being in the position of being "homeless" or ending up couch surfing at your in-laws or friends' houses while you wait for repairs to be done. Here's how it works and how to get this coverage.
Additional Living Expenses (ALE) Defined
Additional living expenses is insurance coverage that may come with homeowner, renter insurance, or condo owner insurance policies. ALE coverage provides compensation when you are unable to live in your dwelling due to an insured loss or claim, and while your home is being repaired.
ALE provides you with money that allows you to maintain your usual lifestyle and compensate you for the additional costs of living elsewhere when your home is destroyed or uninhabitable. The coverage pays until your home is repaired, or until the additional living expense policy limit is reached.
How Does It Help You?
Besides the actual monetary coverage, the policy gives you the ability to maintain your independence and privacy in your temporary home. This coverage, in turn, can relieve a lot of stress in a claims situation for you and your family. You will have peace of mind knowing that you won't ever be alone trying to figure out where you will stay while trying to recover from a major disaster.
When Can You Claim ALE?
You can only claim ALE if your home is made uninhabitable after a loss that is caused by a risk covered by your insurance policy. Sometimes the repair of your home can make your life inconvenient. You may prefer to just go to a hotel. However, never assume leaving for a hotel will be covered by the policy. An insurance company has to approve you moving out of your house, and the reason has to be due to the claim circumstances. As an example, their criteria for approval might be when there is no running water or electricity. These are conditions that may render the home uninhabitable.
Having some repairs done in your basement for a week after water damage or sewer back up, may not qualify. There are cases where a client has had half their roof being repaired after a storm, but because the damage did not affect their living area very much, and they had heat, electricity, and water, ALE was not approved. Always ask before incurring costs. Each insurance company will assess the claim situation and let you know if you can have the coverage in your situation.
How Does ALE Work?
Additional Living Expenses will cover the insured for the additional costs of living, which go above and beyond their normal costs as a result of a loss covered by an insurance claim. The key here is that the additional living expenses focus on the additional cost.
For example, if a renter normally pays $500 a month rent, and due to a fire in their building, their landlord tells them not to worry about paying the rent until the apartment is inhabitable again, then right away, they are not putting out their normal $500 expense for living. Let's say they find a temporary lodging of similar quality and location, but because it's furnished, it costs them $900 a month. Their additional living expense is $400 in this scenario. Not $900.
Similarly, let's say that because of the tough situation, the renter decides to live a little more luxuriously while they wait for their apartment to be ready, and instead of the $900 apartment, they go for the top floor unit with the view for $1,300 a month. The insurance company can review the claim and may be able to determine that this is not a case where the current standard of living was being maintained, and may only agree to pay an equivalent to the $900 apartment, once again only paying $400 for actual additional living expenses during the month the tenants were displaced.
Here are a few examples of things that an insurance company will consider paying for under the ALE coverage in a claim if it makes sense to maintain your lifestyle:
- Restaurant meals
- Costs for increased mileage or transportation costs due to the new temporary location
- Costs for your temporary accommodation, be it a rental, a hotel, motel, or room in a boarding house.
- Costs of doing laundry—If you have to send your laundry out because you don't have access to a washer and dryer at your temporary home, then it may be covered, for example
- Furniture rental—costs to rent special items you are usually used to having may be covered and considered
- Storage costs for contents under special circumstances
- Moving or displacement costs
- Pet boarding and more
Because additional living expenses are meant to cover the difference between what you normally pay and what you now have to pay due to the fact you're not living at home, although the above costs may be covered by ALE, there will always be an assessment around how the costs you're claiming compare to the normally expected costs of your lifestyle.
As in the example of the tenant renting, similar assessments will be made by the insurance adjuster.
It is easy to misunderstand what is going to be paid out to you when you claim ALE. The last thing you want to do is start spending all kinds of extra money, only to find out you are only getting half of it back.
The good news is that most insurance companies have large networks and resources to help you find a home or rental similar to yours, and conditions pretty close to what you've been living in.
The adjuster will usually provide you with options to choose from that will meet your ALE limits, and will be in a position to discuss how long your coverage will pay for the additional living expenses. Because ALE has a limit in most circumstances, you don't want to run out of money to cover your expenses, which is why it is a good plan to ask your insurance adjuster specifically about the length of time you can expect to be covered for while there are repairs being done in your home.
Limit on an Insurance Policy
Depending on your policy form and type of policy, the limit on ALE is usually:
- About 30% of the dwelling limit amount on standard homeowner policies,
- Around 50% of the personal property or insured contents amount on condo policies
- Approximately 30% of the personal property or contents limit on a standard tenant policy.
These are just examples of what you might expect as a standard ALE limit. The key here is to know your limit, which you can find on the insurance DEC page of your policy or the wording.
There are policies with higher limits, and insurance companies may decide to increase ALE limits based on their criteria.
You should always inquire with your insurance representative about the ALE coverage and decide if this is going to be enough to cover your costs if you have to move out of your home for an extended period while repairs are being done.
Restaurant costs are a common ALE expense that is misunderstood. You should always ask your adjuster how these costs will be reimbursed and what they consider to be a reasonable amount per meal. Insurance companies usually have a guideline for what they are willing to reimburse as an average.
When your bills fall within this norm, then you won't have a problem. If they are above the norm, then your claim will be examined more closely, and you may have to prove your actual loss and costs before getting paid. This accounting extends beyond just providing a receipt. It includes proving what you normally spend on food, then proving the restaurant costs you are paying are reasonable compared to your lifestyle.
You may also want to ask your adjuster if the alcohol costs will be paid as part of these restaurant bills. You would be surprised how many people think their full bill will be paid, but only portions end up being paid.
For example, Mary and Joe enjoy gourmet food. Joe is an excellent chef and usually keeps high-quality meats and seafood and creates nice meals every day. Mary and Joe have a temporary rental home with a full kitchen. They go out to dinner several times and submit the receipts to the insurance company for reimbursement.
The insurance company questions the bills, citing that the meals are all over $200, and are beyond their normal allowance for ALE. Joe explains they like to eat very well and are used to high-end cuisine in their home. The adjuster knew this about these clients, and that's why they put them in a very well furnished home with excellent kitchen amenities.
Unfortunately, Joe's explanation of their additional living expenses doesn't add up in this case. The clients were given all the same amenities they had at home. Eating at their favorite restaurants was not an additional living expense caused by the claim or displacement. In this case, the insurance company was within their right to pay the usual food allowance to the standard of what would exceed their usual grocery purchases. Joe and Mary were out of pocket because they misunderstood the coverage.
4 Ways to Make Sure You Get Maximum Benefits Paid
- Be ready to provide receipts for all your expenses.
- Document how the expenses are an increase from your normal expenses.
- Provide proof of your normal expenses to be used as a comparison point for the insurance company in case they question things.
- Get written authorization for any special expenses from the insurance company to avoid misunderstandings.
There's nothing wrong with enjoying yourself and trying to make the best of a hard situation; it's just important to know what you will be getting. When in doubt, always ask your adjuster to explain how things will be covered, so you don't end up footing the bill.