Find out how your homeowners insurance can help if your dwelling becomes uninhabitable.
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.
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:
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:
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:
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.
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.
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.
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.
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.
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.