Being displaced due to home damage or loss can disrupt your day-to-day routine and significantly increase your out-of-pocket expenses. However, you may be entitled to claim additional living expenses to cover the extra costs you incur as you wait for your house to be repaired.
Here's what you need to know about Additional Living Expenses coverage.
Basics of Additional Living Expenses
Many homeowner policies contain a provision for Additional Living Expenses (ALE). This coverage pays for expenses commensurate with your normal living. ALE may also compensate you for expenses that exceed your usual household budget.
The exact scope of the coverage will vary across insurance providers. However, ALE coverage generally constitutes additional living costs, fair rental value, and prohibited access.
Fair rental value applies if you have rented out a part of your home. It may cover for the loss of rental income while your property is under repair.
Prohibited access pays for additional expenses incurred following a notice to vacate your house - for example, due to a natural disaster or an emergency event in your neighborhood.
What ALE Covers
ALE coverage is meant to cover expenses you would not normally incur when you are at home. Examples include the cost of a hotel or motel, eating out, laundry, renting furniture or a storage unit, or vehicle mileage.
Be sure to check the details of your insurance policy to ascertain the covered expenses. If you are unsure about what constitutes an extra and claimable expense, consult an insurance adjuster to help you assess how the expenses compare to your normal cost of living.
What ALE Does Not Cover
ALE can cushion you against the impact of unexpected out-of-pocket expenses following damage or loss. However, the coverage is not meant to improve your standard of living.
The coverage will not pay for mortgage, lost work hours or exorbitant and unnecessary restaurant expenses - for example, eating out when there are facilities where you can cook.
Amount of Coverage for Additional Living Expenses
Most insurance policies have a precise payable amount for ALE claims. Typically, this amount is a percentage of your dwelling coverage limit.
The amount of coverage will depend on your type of homeowner's insurance policy and will vary from one insurer to another.
Generally, under homeowners (HO) 2, HO 3, and HO 5 policies, ALE coverage is limited to 30 percent of the residence coverage. ALE for HO 8 policies is limited to 10 percent.
For HO 4 policies, the ALE limit is 30 percent of the limit for personal property. Meanwhile, for HO 6 policies, the ALE coverage is 50 percent.
Note that your coverage is limited by time. Ask your insurance adjuster about the amount of time you can expect to be protected while your house is under repair.
Maximize Additional Living Expenses
Following home damage or loss, take an inventory of your normal expenses and record how your new expenses are an increase from your usual expenses. Be sure to retain receipts for all your expenses too.
Before spending money on any special expenses, discuss with your insurance company and obtain written authorization to ensure that you are reimbursed accordingly.
Claiming ALE can be a challenging process, as insurers usually demand detailed proof that your expenses after damage or loss are more than you would normally spend. An experienced insurance adjuster can help you navigate the maze of ALE claims.
If you've had to move out of your home due to an insured damage or loss, get in touch with People's Choice Public Adjuster to discuss your options for claiming additional living expenses. We have the experience and expertise to help you maximize your claim.