How Do Additional Living Expenses (ALE) Work
If your policy includes coverage for Additional Living Expenses or ALE, there are a few things you need to understand to make sure your expenses are properly calculated and you are reimbursed for all the expenses you are entitled to recover.
1. Your policy requires that your home must be uninhabitable. Uninhabitable may mean different things to different folks. For some this may mean that the home smells badly when a water or small fire occurs and they can’t stand living there until the odor is gone. Others may not mind the odor and want to stay at home. At the end of the day we all have to be reasonable.
As an example if a home is equipped with 3 bathrooms and one of them is damaged and needs full repair, this does not make a home uninhabitable. It might be inconvenient or uncomfortable, but not uninhabitable. However, if this is the homeowners only bathroom in the house, well then that home would be uninhabitable.
2. If your home is uninhabitable your insurance policy owes you for the “increased costs” of maintaining your normal standard of living. The keywords here are “increased costs”. Whatever you normally paid such as your mortgage, your electricity, food, cable, water bill, etc. are your normal costs. Those are not going to be reimbursed to you. What should be reimbursed to you are the items that you are paying in addition to what you normally pay.
For example; if you pay $3,000.00 a month for a mortgage – keep paying it. But if you have to rent a new home, apartment, or hotel – then these are increased costs over and above what you normally pay. If you are in a hotel room for 30 days and have to eat out every meal the difference is going to be the cost above what you normally paid for groceries, plus how many times a week you previously ate out, and what you now have to pay to eat out every meal. In other words, if prior to the loss you spent $200.00 a week for groceries, and ate out once a week for $100.00 for a total of $300.00, but now because you are eating out every meal it costs you $1,000.00 a week – the insurance company would owe you $700.00.
The insurance company may seek to deduct some of your normal expenses if they are discontinued. Lets say you are displaced from your home for 12 months due to a fire. Certain items might discontinue such as cable or electrical. If you no longer pay those bills as your damaged home, then the insurance company will consider those things a wash when calculating additional living expenses.
3. There are some items you may not think of that could cause you additional costs that you could be reimbursed for.
a. Potential increased mileage to work or taking your children to school because your temporary home is further away then your main home.
b. Furniture rental. Generally rental homes are not fully furnished or furnished to your liking. Possibly there aren’t certain items or amenities that you used to have at your previous home. It is understandable that you will not be able to duplicate everything you had, but certainly some main items such as reclining chairs, big screen tv, coffee pot, microwave etc. can be supplied to you by a furniture rental company.
c. Dry cleaning/laundering. Your hotel or temp. home may not be equipped with proper laundry facilities. You can recover the increased costs of having your clothing laundered and/or dry cleaned.
The idea is to keep receipts for everything. Even for small simply items such as coffee in the morning, mileage tracking, all receipts for food, expenses, etc. Keep a good ledger and provide to the insurance company any receipts that you are submitting for reimbursement.
Understand that Additional Living Expenses are paid to you on a reimbursement basis. The insurance company does not owe this money up front although for items such as temporary housing they likely will pay the hotel or owner of the home directly. Food, mileage, increased utilities, dry cleaning, etc. will be reimbursed once receipts have been provided and adjusted.
If you are displaced to a hotel your increased costs will likely be higher due to the fact that you won’t have a kitchen to cook your meals in, and may not have laundry facilities. However, if you are in a home with a kitchen and laundry room, then your costs should be the same as they usually are with these items.
Our Claim Advisor pros are able to provide additional information if you have questions regarding Additional Living Expenses.