Disasters like wildfires leave indescribable anguish behind when they occur in any neighborhood. They can destroy millions of acres of property in a state like California, leaving tens of thousands of people homeless. If you have homeowners insurance and happen to lose your home due to a fire, additional living expenses coverage can temporarily help you get by as your house is being repaired or rebuilt
Read on to learn how helpful this component of your home insurance policy can be when a covered disaster destroys your home.
What Is Additional Living Expenses Coverage?
Additional living expenses (ALE) or loss of use coverage provides the extra money you need to spend to maintain your pre-loss lifestyle. Also known as Coverage D, this insurance pays for additional living expenses you’re forced to incur after temporarily relocating to a hotel or rental facility while your uninhabitable house is being rebuilt or repaired.
For you to be compensated, the loss of use must have come from a covered event like a fire. This coverage has a limit that’s typically a fraction of your main dwelling coverage. For instance, if your dwelling coverage limit is $200,000 and your ALE insurance limit is 30%, you’d be reimbursed up to $60,000 for all covered loss-of-use expenses.
Typically, ALE insurance limits vary by policy and insurer. You can talk to your agent about your specific coverage needs and determine whether it’s necessary to increase your coverage limit for any additional expense.
Keep in mind that ALE insurance only applies to residential property damage following a covered peril. If you don’t have flood coverage, which a standard home insurance policy doesn’t provide, you wouldn’t be covered for loss of use due to a flooded home.
Loss of Use Coverage Benefits
Loss of use insurance covers extra living expenses resulting from a covered home loss. Take the example of staying at a hotel further from your workplace as your home is being rebuilt. If this inconvenience has your commute cost per month increase from $100 to $150, you would be compensated the additional expense ($50).
Additional living expenses insurance usually covers the following temporary loss items after a covered home loss:
- Temporary housing costs, including living in a hotel
- Public transportation costs
- Pet boarding
- Additional cost of meals
If you were drawing rental income from your home or part of your home, you may be compensated for the lost revenue if a covered event made the property unusable. However, additional living expenses insurance wouldn’t pay for any costs not incurred over this period, including utilities.
Items Not Included in Loss of Use Coverage
ALE insurance doesn’t include expenses you were going to incur anyway, with or without the loss of your home. Things like mortgages and insurance aren’t covered. If you have to eat out after losing your home, the policy will only cover the extra cost of meals instead of your entire food budget for the short period.
Choosing an Appropriate Loss of Use Coverage Amount
Your specific living expenses should help determine how much loss of use coverage you need. Most insurers set it at roughly 30% of the dwelling insurance limit.
These are the vital roles that additional living expense coverage plays in homeowners insurance. To review your loss of use coverage needs, contact the team at McCarty Insurance Agency today. We are happy to help you make the most of your home insurance.