What do you do when you’re facing the unimaginable? If your home is destroyed by a covered disaster, it’s difficult to determine how you will make ends meet during the restoration. In most cases, you can rely on the additional living expense (ALE) stipend from your insurance provider.
At Avner Gat Inc., we’ve worked on hundreds of homeowners insurance claims. In our experience, families find that the additional living expense payout is one of the most confusing elements of the insurance claims process. Today, we’ve put together a brief guide to help you understand your coverage:
What is an ‘additional living expense’ coverage?
Additional living expense coverage is included in many insurance policies. However, this critical coverage is often misunderstood. The additional living expense (ALE) coverage in any policy is intended to make up the difference between the families regular living expenses and what they’ll need to pay to maintain a comparable standard of living after a covered loss.
How can I calculate my expected ALE payment?
Your ALE coverage amount is the difference between your expenses before and after you file your homeowners claim. If you’re already dealing with a loss that rendered your home temporarily uninhabitable, you can use one simple equation to determine the exact amount of your ALE payment:
(Current Living Expenses) – (Living Expenses Before Your Covered Loss) = ALE Payment
The truth is, many homeowners struggle to calculate their additional living expense payment. That’s because they have one major misconception about ALE benefits. You see, additional living expenses only cover expenses that you wouldn’t have had if you had not experienced a loss to your home. Essentially, this means that you’ll still be responsible for expected monthly expenses like tuition payments or your mortgage. Your insurance provider will not cover them.
What qualifies as part of my living expenses?
Living expenses include things like rent payments, electric bills, communications utilities, and meals. As you calculate your post-loss living expenses, you might also consider things like storage fees, laundry expenses, pet boarding costs, and any additional mileage on your daily commute. We recommend that you consult with the corporate adjuster handling your claim and review your policy for the most complete information.
Aside from the spending limit, California requires that your insurance provider allow you to collect ALE benefits for at least 24 months after a covered loss. However, in the unlikely event that restoration takes 24+ months, it would be up to your insurance provider to determine whether they will continue extending ALE coverage. To obtain the most accurate information, refer directly to the terms outlined in your signed policy.
How do I calculate my post-loss living expenses?
While it may seem simple to track your expenses after a major insurance claim, it can actually be quite difficult. You are going to be in a stressful situation and things will fall through the cracks. Unfortunately, keeping careful records is the only way to ensure that you are reimbursed for the full amount spent after relocation.
To position yourself for success, we have two important tips. First – keep all of your receipts. If you’re unsure whether an expense will be covered, keep a record of the cost anyway. Next – try to designate one form of payment for post-loss expenses. While this is not always possible, it will simplify your record-keeping if you choose one payment method, such as a credit card, and continue using that card for all living expenses. This way, providing receipts to the insurance company might be as simple as copying your statement.
How will I receive my ALE payment?
Generally, you’ll be reimbursed in small increments. Your insurance provider usually will not offer you an advance ALE payment. In some cases, you can negotiate for payment in advance, but it may take some effort. Insurance providers like to be certain how their money will be used, so they prefer to reimburse you after you provide receipts to verify additional expenses. In all cases, it’s important to document everything you can.