This article is part four in a series explaining the different coverages homeowners insurance includes. Read part one on contents coverage, part two on dwelling coverage, and part three on liability coverage.
If your home were damaged so badly it became uninhabitable, what would you do?
Not only is your home one of your most valuable assets, it is also where you live! Your home provides necessary shelter for you and your family. If your home were damaged and unlivable, what would your backup plan be?
It it were a covered event or peril under your homeowners insurance that caused the damage to your home, the Additional Living Expenses (ALE) coverage part of your policy would kick in to help you secure temporary housing. This coverage would reimburse you for the costs of having to live outside your home during rebuilding.
Types of Coverage
Additional Living Expenses provides coverage for the cost of living you’d incur if you had to live outside your home. These additional costs can include hotel stays, meals at restaurants, and lost income if you rent part of your home.
ALE applies to the same standard damages that are listed under your dwelling coverage. According to the Insurance Information Institute, that should typically include “...fire, hurricane, hail, lightning or other disasters listed in your policy. It will not pay for damage caused by a flood, earthquake or routine wear and tear.”
Flooding can cause devastating damage to your home and make it unlivable, but it is not included under homeowners insurance. Consider supplemental insurance for flood and other excluded perils for both damage and ALE if your home is in an area with risk.
Your ALE coverage is typically a percentage of your dwelling coverage. Check with your insurance agent to understand how much your policy offers. It’s not a payout you can take and then go crash on a friend’s couch - you’ll want to hold onto all receipts to ensure you get reimbursement.
ALE can also cover your meals out if your temporary lodging provides no access to a kitchen. However, this is not the time to splurge on steaks every night and book a room at the Ritz - you’ll want to speak with your insurance company to see what your policy will provide. Don’t be surprised if your insurer factors in how much you’d normally spend on groceries in a week and then deducts it from your meal allowance. It is called additional living expenses for a reason, after all.
In addition to limits on the amount of money the insurance company will provide for ALE, you should also consider that there may be limits on the amount of time they’ll provide this coverage. Many policies will no longer offer coverage after a certain amount of months have passed. If you’ll need to use this coverage, check with your agent to make sure you know how long you’ll have this assistance, should you need it.
Determining How Much You Need
There’s no hard and fast way to determine how much you could need, since the nature of the damage to your home would dictate how long until it was habitable again. The value of your coverage is tied to the limits of your dwelling coverage, so there isn’t much flexibility in how much coverage you can buy, however, usually you are able to add supplemental ALE coverage for a fee. If you are worried that your coverage may not be enough should something happen, speak with your insurance agent to review your options.