Does your home insurance offer 'additional living expenses'?
By John Egan
If structural damage from a hurricane forces you to leave your home, will your home insurance company pick up the tab for a hotel room? In most cases, your home insurer will cover the bill, thanks to the "additional living expenses" (ALE) section of your policy.
"ALE coverage provides an important lifeline to policyholders whose lives are devastated by disasters," the American Insurance Association says.
Here are answers to some common questions about ALE coverage.
Does my home insurance policy include ALE?
Most homeowner's insurance policies cover "additional living expenses," or "loss of use" costs, that arise from a covered loss.
When does ALE take effect?
If you can't live in your home because of a loss covered by your policy - such as a hurricane or tornado - your home insurer will reimburse you for certain expenses that you rack up while you're living away from home. For example, if a fallen tree damages your home so heavily that you can't stay there - and if that loss is covered under your policy and you have ALE coverage - then your insurer will pay for the "actual, reasonable and necessary increase" in your living expenses while your home is being repaired or rebuilt.
What qualifies as "additional living expenses"?
Among the out-of-pocket costs that are covered are hotel bills, apartment rent and restaurant meals. Generally, ALE covers the gap between pre- and post-disaster housing and food. For example, if you usually spend $500 a month for food but now you've got to fork over $750 a month because you've got to eat out, your insurer may pay $250 for the additional cost of food.
How do I collect ALE money?
You've got to file a claim with your home insurance company as soon as possible.
Does ALE cover my regular bills?
No. Your normal expenses, such as your mortgage, gas, electric and water bills, aren't covered by ALE.
What are some of the other things not covered by ALE?
Examples of other items not typically considered ALE are replacement of belongings like toiletries and clothing, temporary repairs to your home and entertainment expenses while you're in temporary housing.
What kind of lodging is covered by ALE?
Your temporary home must be similar to your insured property. If the insured property is a two-bedroom house, your insurer won't pay for rental of a five-bedroom house. The same goes for a hotel: Under normal circumstances, your insurer won't cover your stay at a posh resort.
Will ALE coverage kick in if I stay with a relative or friend?
If you move in temporarily with a relative or friend and don't have extra costs, your insurer won't cover additional living expenses.
How much money can I expect from my ALE coverage?
Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 20 percent of the insurance on your home. For example, if the dwelling coverage is $500,000, your ALE coverage would be $100,000. You can increase this coverage for an additional cost. Some insurers sell policies that offer an unlimited amount of loss-of-use coverage but for a limited amount of time.
When will I get paid for my additional living expenses?
Your home insurance company usually advances you money for these extra costs. However, in Florida, for instance, insurers aren't required to pay ALE upfront, so your extra expenses will be reimbursed later. You'll be required to account for any covered expenses, so be sure to keep all of your bills and receipts. Any advance payments you get will go toward your final claim settlement.
Can I obtain ALE money if my home was damaged by a flood?
Floods aren't covered by standard home insurance policies, and separate flood insurance policies don't cover ALE. Therefore, any additional living expenses will come out of your pocket if you can't live in your home following damage caused by flooding or storm surge.
When will my ALE coverage run out?
ALE coverage applies for the shortest period of time "reasonably required" to repair or replace your home, or it expires when the maximum amount of ALE coverage is paid.
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Sources: Allstate, American Insurance Association, California Department of Insurance, Insurance Information Institute, Florida Department of Financial Services, Foremost Insurance, Maryland Insurance Administration, New Jersey Department of Banking and Insurance