Additional Living Expenses Coverage

Additional living expenses coverage

When a peril renders your home uninhabitable, it’s good to have something to fall back on. This is where additional living expenses coverage — sometimes referred to as ALE coverage, Coverage D, or “loss of use coverage” — comes in.

Read on to find out what’s covered by this portion of your homeowners policy and see how it can help you find your footing after a claim.

Additional living expenses — table of contents:

1. What is additional living expense coverage?
2. What counts as an additional living expense? 
3. How much ALE coverage does my policy provide?
4. Does flood insurance have ALE coverage?
5. What if I rent part of my home?
6. Additional living expenses considerations

What is additional living expenses insurance? 

If a covered peril damages or destroys your home, additional living expenses coverage can help to pay for a number of the expenses that you incur. This is a standard part of a condo, renters, and home insurance policy and is often used to cover meals in restaurants, hotel bills and a number of other expenses that arise while your home is being repaired or rebuilt.

Most homeowners policies provide ALE coverage at around 20 to 30% of your dwelling coverage. If the main structure of your home is insured for $200,000, you would be entitled to approximately $40,000 in additional living expenses coverage. 

Common perils that could trigger additional living expenses coverage include some of the following:

• Windstorms
• Fire and smoke damage
• Explosions
• Damage caused by the weight of snow, sleet or ice
• Vandalism
• Falling objects
• Water damage from a burst pipe

What counts as an additional living expense in homeowners insurance?

If you make an insurance claim for a covered loss, your insurance company will pay for many of the extra costs associated with temporary housing and many other expenses.

While each insurance company may have different guidelines as to what constitutes an additional living expense, most will cover the following:

• Temporary housing (hotel stays)
• Rental home
• Pet boarding
• Restaurant meals
• Extra mileage if your distance to work has increased
• Storage unit costs
• Parking costs
• Public transportation

How much ALE coverage does my policy provide? 

As stated above, most homeowners insurance policies provide ALE coverage limits at around 30% of your primary dwelling policy limits. However, if you have an older home that is insured under an HO-8 policy, you will face a lower percentage. The specific amount that you are entitled to can usually be found on your declaration page.

According to the Insurance Risk Management Institute (IRMI), the breakdown for specific policy types looks like this:

Some premium home insurance companies — such as Chubb and AIG — do not cap the amount of money provided for additional living expenses.

What’s the additional living expenses coverage limit for renters insurance? 

Renters insurance policies contain additional living expense coverage as well. Renters policies — also known as an HO-4 policy — provide coverage limits that usually run around 30% of your personal property limits.

This part of your renters insurance covers the same extra expenses that a homeowners policy covers, including hotel stays, restaurant bills, and other additional costs that come about.

What’s the additional living expenses coverage limit for condo insurance?

Loss of use coverage is included in your condo insurance policy (HO-6). Since there is no dwelling portion of your policy, most insurers will set the amount you are entitled to as a percentage of your personal property coverage — typically set at 50% — that covers most of the same expenses as a homeowners policy.

How long does my additional living expenses coverage last? 

Most home insurance companies will place a limit on how long this coverage will last. This varies by carrier, but upper limits typically come in at around 12 months, though they can be as high as 24 months in some cases. This can be different for condo and renters policies, so make sure to clarify this with your insurance company.

Does flood insurance include additional living expenses coverage? 

Most of the time, flood insurance must be purchased through the National Flood Insurance Program (NFIP), a government flood insurance plan backed by FEMA. If you have a flood insurance plan through the NFIP, additional living expenses are not covered. But some private insurance companies do provide flood insurance. In these cases, your additional living expenses might be covered in the event of a flood, though you would need to check with your insurance provider to be certain.

What if I rent out part of my home? 

If you have a garage apartment or spare room that you rent to a tenant that becomes uninhabitable due to a covered loss, fair rental value coverage can help you recoup rent that you would otherwise lose. Typically, insurance companies will withhold the amount of taxes or of certain bills that are not being paid during the period in which the property is uninhabitable.

Additional living expenses coverage: other considerations

ALE coverage is meant to allow you to live at — or as close as is possible — to the same standard that you enjoyed before. For these reasons, the amount of dwelling coverage you have directly impacts the coverage limits of your additional living expenses. Make sure to keep your expenses in line with your previous standard of living, or else your insurer may have grounds not to reimburse your expenses.

Each company can vary in how terms are set. If you are interested in a more affordable policy with wider coverage, The Zebra can help you compare rates from a number of top insurers.

Sources:

• Insurance Information Institute 
• Insurance Risk Management Institute
• FEMA flood insurance