The Advantage of Additional Living Expense (ALE) Coverage

Additional Living Expense (ALE) coverage is a standard part of most homeowners' insurance policies. It will cover your additional living expenses, such as food or staying at a hotel, while your home is temporarily uninhabitable after a covered property damage loss — like a fire. Unfortunately, many homeowners do not realize they have this coverage and may not see how it can help carry the financial burden of temporary housing during the restoration period.

What is ALE?

According to the International Risk Management Institute (IRMI), "ALE coverage reimburses the insured for the cost of maintaining a comparable standard of living following a covered loss that exceeds the insured's normal expenses before the loss."

In most homeowner policies in Texas, this coverage is generally equal to 10-30% of Coverage A. That is up to 30% of your home's replacement cost coverage limit. However, there are a few exceptions, such as the HO-8 policy, where this coverage is capped at 10%. HO-8 policies are usually written for high-value, expensive homes and historic mansions.

After a covered loss, ALE should pay for your above regular costs for expenses such as:

• A motel/hotel room, a rental apartment, or a home while your property is being repaired or replaced. The extent of damage (which drives the length of time for repairs) will determine whether short-term or longer-term housing is appropriate.
• Rental furnishings.
• Utility costs.
• Dining expenses, exceeding your usual cost of groceries.
• Extra automobile mileage if you locate farther away.

Like any other coverage, ALE will only pay up to the policy’s limit. However, you will need to document your expenses and communicate with your claims adjuster from your insurance company. Remember that you will need to prove your claim so take the time to be accurate when submitting your claim to your adjuster.

One standard error we see homeowners make is to estimate their usual grocery costs inaccurately. Understand that you are entitled to feed your family and even dine out while your home is repaired, but ALE will only cover expenses beyond your usual grocery budget.

Documentation is a must when dealing with an insurance claim. Thankfully, modern technology has made it easy to photograph receipts, file them, and email them to your claims adjuster. 

Other ALE Issues: Utilities

Additional utility bills that you incur will be covered, e.g., you move from an energy-friendly solar-powered home to an older, drafty farmhouse that has much higher utility costs.  Have your utility bills available to prove the excess costs to the adjuster. The added expenses to switch utilities to and back from a new address are also covered.

Take Advantage of ALE Right Away

If this is your first time coping with a homeowner's insurance claim, you might not realize how long home repairs or replacements can take. Between contractors, estimates, labor, delivery delays, and any random hiccups (mold, bad weather) that occur, your repairs might take a while. 

But Don't Go Overboard

Remember that ALE has capped limits at a percentage of your home's insured value. So a fancy hotel might work for a short time while you find a more suitable temporary quarter but try not to overspend! 

There are full-service, fully furnished apartments available in most major metropolitan areas. In addition, the team at Jansen AI has worked with Murphy's Corporate Housing Associates (MCHA) and has had many positive experiences with them. They work very hard to accommodate displaced families and can even help find a location to keep your children in the same school district for long-term rebuilds. 

Recently a client’s family needed a temporary dwelling in Houston, TX. Their hotel was quickly eating up their Additional Living Expense coverage, and they faced running out of funds. In less than 24 hours, the team at MCHA found this family an apartment near their neighborhood, reducing their daily costs by more than 50%. Because MCHA understands the housing market, they helped our client quickly and efficiently during that difficult time. We are proud to partner with them!

Ultimately, if you take one thing from this article, let it be this: The ALE coverage included in your homeowner's policy can ease the financial burden of temporary housing following a disaster and allow you to live as comfortably as possible during the restoration period. In addition, this will give you the time to make sure that you do not settle your property damage claim prematurely without obtaining an adequate settlement.