Q

What is additional living expenses coverage & how does it work?

A

Additional living expenses (ALE), also called loss of use coverage, is the part of homeowners insurance that helps cover expenses like hotel stays and restaurant meals while your house is being repaired after a covered loss.

If you're ever forced to flee your home after a major disaster, one thing you may be left wondering is how you’re going to pay for a temporary place to stay, restaurant meals, and other life expenses while you get back on your feet. Fortunately, most home, condo, and renters insurance policies include additional living expenses (ALE) coverage to help cover these added costs while your house is being rebuilt or repaired.  

Key Takeaways

  • If your home is badly damaged by a covered loss, additional living expenses will help pay out for any extra livings costs while your home is being repaired or rebuilt

  • Additional living expenses coverage covers things like hotel rooms, dining expenses, and loss of rental income

  • In a standard policy, your ALE coverage limit is typically 20% of your home’s insured value, but higher limits may be available depending on your insurer

  • If you’re forced to flee your home due to a covered disaster, be sure to hold onto all of your receipts for lodging, food, and any other expenses while you’re on the road

Does homeowners insurance cover additional living expenses?

Yes, a standard homeowners insurance policy covers increases in living expenses while your home is being repaired after a covered disaster. Also known as loss of use coverage, or Coverage D, this is the section of home insurance that will help pay for temporary housing costs, the added costs of eating out, and it may even cover loss of income if you were renting out part of your house to a tenant. 

Take, for instance, a scenario where a fire or major disaster makes your home uninhabitable, causing you to relocate for several months. Additional living expenses coverage would help pay for hotel stays, restaurant meals, storage facilities, and any other necessary living expenses while you await repairs. 

Keep in mind that this coverage only pays for reasonable expenses that don’t vary too much from what you were paying before. In other words, if the damaged residence is a modest $1,600 one-bedroom apartment, your insurer probably won’t pay you to rent out a luxury one-bedroom penthouse for $3,000 a month. 

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What is covered by additional living expenses (ALE) insurance?

Additional living expenses coverage can help cover temporary lodging, increased food costs, and other expenses if a covered peril damages or destroys your residence. Covered perils that can cause extensive damage to the structure of your house include:

  • Fire and smoke

  • Windstorms

  • Water damage from burst pipe

  • Explosions

  • Falling objects

  • Vandalism

  • Weight of ice, snow, or sleet

  • Volcanic eruption

If you’re forced to flee your residence due to a covered loss, be sure to let your insurance company know immediately so that you can be reimbursed for extra living costs while you’re away from home.

What can additional living expenses coverage pay for?

Additional living expenses helps pay for increased living costs that you take on while your home is being repaired after a covered loss. Your insurance company essentially covers the difference between what you normally pay for things and what you now have to pay since you’re not living at home. 

Expenses that your insurer could reimburse you for include: 

  • Hotel stays or temporary rentals

  • Restaurant bills

  • Cost of coin-operated laundry machines

  • Utility expenses at your rental unit

  • Boarding your pet

  • Additional fuel expenses if you have to commute farther

  • Renting a car

  • Storage unit costs

  • Moving or displacement costs

  • Loss of rental income

For a more successful ALE home insurance claim, be sure to hold onto all of your receipts while you’re not living at your residence. Your insurance provider will reimburse you for additional living expenses after a covered loss, but you’ll need to provide proof.

How much ALE coverage is provided?

Additional living expenses coverage comes with a limit of liability, or the maximum dollar amount that your policy will pay out after a covered loss. For loss of use coverage, the default amount is usually 20% of your home’s insured value. That means if your home is insured for $300,000, you have $60,000 in ALE coverage per covered incident. 

Most insurers offer higher ALE coverage limits at an additional cost to the policyholder. If you live in a natural disaster-prone area, you may want to consider increasing this limit in your policy. 

To see your loss of use coverage limit, check your policy declarations page.

Frequently asked questions

Is additional living expenses the same thing as loss of use?

Yes, additional living expenses is simply another name for the loss of use coverage section of your home, condo, or renters insurance policies.

Do you get a cash advance on ALE claims?

This really depends on your insurance company. Many home insurance providers won’t offer policyholders a cash advance on ALE claims unless they specifically ask for one. Otherwise, insurers typically send out ALE claim reimbursements on a monthly basis, after you’ve submitted your expenses for the previous month. Be sure to check with your insurer to see if cash advance loss of use claims are an option.

How long do ALE benefits last?

According to a standard home insurance policy: “Payment will be for the shortest time required to repair or replace the damage or, if you permanently relocate, the shortest time required for your household to settle elsewhere”. Some insurers may also have time restrictions for benefits — like six months or a year. Check with your home insurer to see if there’s a time limit on loss of use claim benefits.

What is fair rental value coverage?

If you’re no longer able to rent out a room or section of your home because of a covered loss, fair rental value coverage will reimburse you for lost rental income. This coverage is technically provided as part of the additional living expenses section of your policy.