Guide to Additional Living Expenses (ALE) Coverage
Not all homeowners know or understand the fine print in their homeowners insurance policy. But they know they have insurance cover for certain events that might cause damage to their home or belongings.
However, most never contemplate what would happen if their home becomes uninhabitable due to, for example, smoke and fire damage and how they will pay for additional living expenses while it’s being restored or rebuilt.
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. This guide will explain how it works.
What Is Additional Living Expenses Coverage?
Additional living expenses coverage is included in most homeowners insurance policies. It’s typically found under the “loss of use” section in a home insurance policy and applies if your home is uninhabitable or unsafe to live in after a covered event.
ALE reimburses you the difference between your regular living expenses before a covered loss and your living expenses after a covered loss for you to maintain a similar standard of living.
ALE Coverage Limits
ALE coverage is usually subject to the following limits:
- 30 percent of the dwelling limit under forms HO2, HO 3, and HO 5 (homeowners insurance).
- 10 percent of the dwelling limit under form HO8 (homeowners insurance).
- 30 percent of the personal property limit under form HO4 (renters insurance).
- 50 percent of the personal property limit under form HO6 (condominium owners policy).
For example, if your ALE coverage limit is 30% of the dwelling limit and you have $400,000 of dwelling coverage, your additional living expenses coverage is $120,000 maximum.
How Can I Calculate My Expected ALE Payment?
You can easily calculate your ALE payment using the following equation:
(Current Living Expenses) – (Living Expenses Before Your Covered Loss) = ALE Payment
Pet Boarding – You pay $45 per night to board your dog, whereas before you looked after your dog. Since it’s an additional expense you didn’t previously have to pay for, you will typically receive reimbursement from your insurer.
Extra Mileage – If you pay more in transportation costs since your temporary location is further away from where you work, you can claim reimbursement for the difference.
Key Takeaway: Additional living expenses only cover expenses you wouldn’t have had if you could continue living in your house after a covered event. You’ll still have to pay your usual monthly bills, such as tuition fees and your mortgage. Your insurer will not reimburse you for it.
What Qualifies as Part of My Additional Living Expenses?
Additional living expenses typically include, but are not limited to:
- Temporary accommodation costs
- Laundry costs
- Storage costs
- Moving or displacement costs
- Pet boarding
- Restaurant meals
- Increased mileage or transportation costs
Ask your insurer or insurance adjuster for guidelines on how much you can spend. For example, insurance companies often have guidelines of how much you can spend in a restaurant. And get authorization in writing for any special expenses that might not be considered normal.
ALE Coverage in California Relating to a State of Emergency
In California, if the cause of a covered loss is declared a “state of emergency,” then insurers must offer at least 24 months of Additional Living Expenses (ALE) benefits, up to policy limits. This may be extended by an additional 12 months due to circumstances beyond your control.
California Insurance Code Section 260(b)(1) states:
In the event of a covered loss relating to a state of emergency, as defined in Section 8558 of the Government Code, coverage for additional living expenses shall be for a period of no less than 24 months from the inception of the loss, but shall be subject to other policy provisions.
An insurer shall grant an extension of up to 12 additional months, for a total of 36 months, if an insured acting in good faith and with reasonable diligence encounters a delay or delays in the reconstruction process that are the result of circumstances beyond the control of the insured.
Circumstances beyond the control of the insured include, but are not limited to, unavoidable construction permit delays, lack of necessary construction materials, and lack of available contractors to perform the necessary work. Additional extensions of six months shall be provided to policyholders for good cause.
How Do I Calculate My Post-Loss Living Expenses?
Keeping records of expenses is the only way to ensure that you are reimbursed for additional costs you incurred.
Here are two tips that might help you:
- Keep all of your receipts – If you’re unsure whether an expense will be covered, keep a record of the cost anyway.
- Use one designated form of payment for post-loss expenses – Choose one payment method, such as a credit card, and continue using that card for all living expenses. It will make it easier to keep track of your expenses – providing receipts to your insurer might be as simple as copying your credit card statement.
How Will I Receive My ALE Payment?
In principle, insurance companies will reimburse you by check for expenses as you incur them, so you don’t have to wait for a lump sum payment.
If you don’t have sufficient funds or credit available, your insurance company might be willing to give you an advance payment.
That’s a Wrap
We trust this guide has given you a better understanding of how additional living expenses coverage works.
Large or complex claims, such as when your house is uninhabitable or unsafe to live in, can be hard to manage. In such cases, hiring a public adjuster to act in your best interests can be a smart move.
An experienced and licensed public adjuster can help you overcome the challenges of managing your homeowners insurance claim. And they can assist you in getting the best possible settlement offer you’re entitled to under your insurance policy.
Avner Gat, Inc. has 17+ years of experience as a public adjuster in Los Angeles, covering Southern California. We protect homeowners from the games and fine print that insurance companies are known for.
Call us at (818) 917-5256 to find out how we can help you.