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A tree branch crashes through your roof. Your homeowners insurance covers the cost of repairs—but while the roof is being fixed, where will you live, and who will pay for it? Homeowners insurance generally covers alternative living expenses if you have to live elsewhere while your home is repaired. To receive reimbursement for your temporary quarters, however, it's important to understand what your insurance policy does and doesn't cover, and how alternative living expenses are paid. This is why it is still important to have home insurance on older homes.
What Is Alternative Living Expense Coverage?
Alternative living expense (ALE) coverage, also called "loss of use" coverage, is typically included in a standard homeowners insurance policy. It reimburses you for some extra living expenses due to the loss, such as the cost of a hotel or apartment stay. Insurance usually also covers ALE if you are under a mandatory evacuation order due to an emergency such as a hurricane, tornado or flood.
Home repairs can take months to complete, especially after a widespread disaster when contractors and materials are in short supply. With the average daily rate for U.S. hotels hovering around $100 and the average rent on a one-bedroom apartment surpassing $2,000 in many big cities, the cost of alternative living arrangements can quickly add up. ALE coverage helps cushion the financial blow.
The money you receive for ALE is separate from your home structure coverage, so don't worry that using ALE will eat up the money you need to repair or rebuild your home.
What Alternative Living Expenses Are Covered?
After you file a homeowners insurance claim, a claims adjuster from the insurance company typically visits your home to assess the damage. Before ALE coverage kicks in, the adjuster must determine that your home is unlivable. You may consider your home unlivable if it doesn't have a functional kitchen, but the insurance company may not agree. To help ensure your ALE claims are paid, get approval from the claims adjuster before moving out.
Once an insurance adjuster declares your home uninhabitable, ALE coverage pays for any additional expenses due to relocation, typically including:
- Rent or hotel costs, including security deposits or other initial expenses associated with renting
- Restaurant meals
- Pet boarding
- Installing utilities
- Moving
- Furniture rental or storage
- Extra transportation costs if you now have a longer commute to work or school
You may also receive payment for other expenses if you can prove that they're due to living away from home. United Policyholders, a nonprofit group supporting insurance consumers, offers resources to help those making ALE claims.
If you normally rent out part of your home, ALE reimburses you for any rent lost while the home is uninhabitable.
What Alternative Living Expenses Aren't Covered?
ALE doesn't cover all costs of living elsewhere—only those costs over and above your normal expenses. For example, if you typically buy $600 worth of groceries a month, but you're temporarily living in a hotel and spend $1,300 a month eating out, ALE will pay the difference ($700), not the whole $1,300.
Nor will ALE cover living expenses that your insurer considers excessive compared with your previous standard of living. For example, you can't expect ALE to pay for a luxury hotel suite if your insured residence is a one-bedroom condo. When looking for a temporary residence, try to find one that's comparable to your home.
Homeowners insurance policies usually set limits on the time frame or dollar amount of ALE coverage. For example, your insurance may pay unlimited living expenses, but only for a set time period. Other policies have no time limits but restrict total ALE coverage to a percentage of your home's insured value. If you're working within limits, keep track of your spending and/or your ALE end date to ensure you don't run out of coverage before repairs are complete.
Damage due to floods or earthquakes isn't covered by standard homeowners insurance; you'll need a flood or earthquake policy for that. Flood insurance policies from the National Flood Insurance Program (NFIP), which account for the majority of flood policies in the U.S., do not cover loss of use, although policies issued by private insurers may. Check your policy details or contact your insurer to be sure.
Earthquake insurance policies sold through the California Earthquake Authority (CEA), the largest provider of earthquake insurance in the U.S., do cover ALE, but policies sold through private insurers may not. If your home is damaged by fire or burst pipes after an earthquake, however, your homeowners insurance may cover those damages and you could qualify for ALE through that policy.
How to File a Homeowners Insurance Claim
To receive payment for alternative living expenses, you'll need to file a homeowners insurance claim. Here's how:
- Contact your insurer. You can generally begin the claims process online or by phone. After a widespread disaster, such as a wildfire, your insurance company may open a mobile claims center where residents can file claims. A claims adjuster will be assigned to handle your claim, give you a claim number and explain how the claims process works.
- Record evidence of damage. Photograph or record video of damage to your home and property. If possible, don't throw anything away until a claims adjuster says you can.
- Make any urgent repairs. Your insurance company will likely require you to take proper steps to stop additional damage to your home. For example, you might need to board up broken windows. Document the damage first, and keep receipts related to any repair expenses.
- Get estimates. Get quotes from local licensed contractors for repairing or rebuilding your home. Your claims adjuster may use the quotes to estimate how long the process will take and how much it will cost.
- Keep detailed records. Write down the names of people you talked to, note what they told you, and keep records and receipts for any expenses related to the damage or claim.
Maintain detailed records and keep receipts for your alternative living expenses; you'll submit the receipts to get reimbursed. For example, if your temporary living quarters require driving an extra 10 miles round trip to work each day, record mileage driven for this purpose and keep receipts for gas purchases. Documentation such as your mortgage statement, utility bills or checking account statements are useful to show your typical spending living at home.
You generally won't receive ALE payments upfront; instead, you'll need to submit receipts and get reimbursed. If you need money to move out, such as for a deposit on an apartment, see if your insurer will issue an advance.
Work With Your Insurer to Handle ALE
Dealing with insurance claims and home repairs is no one's idea of fun, but the end results will be worth it when you return to your repaired home. By maintaining careful records of your alternative living costs, documenting expenses with receipts, and working closely with your insurance company, you can get through the home repair process with minimal disruption to your life—and your bank account.