If a policyholder is temporarily displaced from their residence, additional living expenses coverage (ALE) will help cover the additional costs of living incurred by the policyholder. Generally, this coverage represents about 10% to 20% of the dwelling insurance.
The ALE policy covers expenses beyond what you would normally incur at home. To maintain your lifestyle before, the insurance should cover the additional expenses. It can cover everything from hotel bills to restaurant meals, emergency clothes, pet boarding, storage, and even furniture rental for items you’re used to having.
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What is Additional Living Expenses Coverage in Canada?
Most household, homeowner, and lessor insurance policies are for people who are prohibited from leaving the country due to insurance damage (in this case fire or consequent damage), or for people who cannot live in their homes. This is commonly referred to as “Additional Living Expenses” or “ALE” in insurance policies.
This helps reduce the financial burden of living away from home during repairs by covering the exceptional costs of; hotel invoices, dining at the restaurant, laundry, rent, mileage, animal pension, and warehouse.
Everyone’s situation is unique, but most Ontario home insurance policies provide different wide categories of claims that do and do not fall under ALE. Policyholders are advised to liaise the situation with the insurance company.
- No trespassing due to mass evacuation order by civil affairs:
This coverage varies by municipality. The Insurance Bureau of Canada (IBC) recommended wording sets this coverage period at 14 days. Policyholders should review their policies regarding restrictions.
- Prohibition of trespassing as a direct result of damage to nearby property:
This applies to people whose homes may not have been damaged but cannot return due to damage to neighboring homes. This cover can be started after the mass evacuation cover is finished. The wording of the IBC guidance sets the duration of this coverage to 14 days. Policyholders should review their policies regarding restrictions. Long coverage is not common in policies, however, policyholders must contact the insurance company to discuss the situation. Insurance companies check insurance covers on a case-by-case basis.
- Damage to your home caused by the insured’s danger-in this case, fire damage or consequent damages:
Insurance is for people who cannot live in their homes due to the damage caused by the insured’s danger — covers fire or consequent damage. This coverage may begin after the coverage for prohibited access has expired. This coverage usually lasts for a reasonable amount of time needed to repair or rebuild the house.
- Advice not to return home for health or medical reasons:
The Alberta Health Commissioner advised not to return home immediately after the mass evacuation order was lifted on June 1 for medical or health reasons. This is usually not subject to ALE. However, policyholders must contact the insurance company to discuss the situation.
In regard to home insurance additional living expenses insurance covers the cost of maintaining a normal standard of living during a temporary move — covers the cost of an equivalent lifestyle. The upper limit depends on the insurer and the insurer, as well as the time limit for coverage. In most cases, the total ALE limit for all three categories above is 20% to 30% of the coverage of home insurance replacement costs. For example, if the policy states that the exchange value of a home is $ 500,000, the maximum coverage for additional living expenses is $100,000 to $150,000.
How Does Additional Living Expense Insurance Work?
A living expense policy can cover additional living costs, such as increasing a grocery bill from dining in restaurants. In addition, when an insured is forced to relocate from their home due to an unexpected fire or a flash flood, an insurance policy covers the expenses they are likely to incur.
Imagine, for example, that your house is rendered uninhabitable by a tornado, forcing you and your loved ones to move until the house has been reconstructed. If you cannot return home, ALE helps pay for expenses including hotel visits and meals at restaurants. Additional items that may be covered include:
- Laundry expenses — The costs to do laundry may be covered. For example, when you want to do your laundry but there is no access to a washing machine in your temporary living space.
- Moving or displacement costs
- Furniture rental— the expenses required to rent items you are used to having might be covered.
- Pet boarding
- Storage costs—This only happens in special circumstances where you have to store some content.
ALE may cover these expenses, but the cost of the claimed benefits will always be assessed compared to the normal costs of the policyholder’s lifestyle. You may, for example, have additional living expenses because you live away from home. These cover the financial difference between the amount you normally pay and the amount you need to pay.
What Do Additional Living Expenses Cover?
ALE (Additional Living Expense) may be triggered if your home is damaged by a disaster listed in your insurance policy.
Examples of the most common covered perils include:
- Weight of snow, ice, or sleet
- Falling Objects
- Fire and smoke
- Water damage from a burst pipe
The insurance coverage may also reimburse you for some living expenses such as:
- Temporary rental fees
- Boarding costs for a pet
- Restaurant bills
How Much Coverage Is Provided?
Your policy will pay a maximum amount for living expenses after a covered loss, which is the dollar limit for the coverage. There is a good chance that your policy includes some additional living expense coverage.
By reading your policy, find out what situations may be covered and how much coverage you will have for additional living expenses. Then, any options for increasing your coverage can be discussed with your agent.
What Additional Living Expense Insurance Doesn’t Cover
Additional living expense coverage does not cover damage to your house or belongings. Your other policy coverages usually protect you against these types of losses.
When a covered disaster, such as a fire or a windstorm, damages a home, the policy’s dwelling coverage may pay to repair the damage. In addition, an individual’s property coverage, a standard feature of most homeowners, condo, and renters policies, can cover the cost of repairing/replacing items damaged by certain perils.
No one wants to be evicted from their property. The first step toward being prepared for a challenging situation is understanding your additional living expenses coverage.