What Is Additional Living Expense (ALE) Insurance?

Additional living expense (ALE) insurance refers to coverage under a homeowners, condominium owner's, or renter's insurance policy that covers the additional costs of living incurred by a policyholder should they be temporarily displaced from their place of residence. Such coverage usually amounts to about 10% to 20% of the insurance that covers the dwelling.

KEY TAKEAWAYS

• Additional Living Expense (ALE) Insurance covers additional costs incurred if a homeowner is displaced and must pay out of pocket as a result.
• ALE coverage is included in most homeowners or renter's insurance policies.
• This type of insurance covers expenses such as food and the cost of staying at a hotel until the primary dwelling is inhabitable.

How Additional Living Expense Insurance Works

Additional living expense insurance can cover things like the increase in a monthly food bill due to having to eat out at restaurants or even the loss of income that might be incurred if the insured person has been renting out part of their dwelling to a tenant. Essentially, the insurance is intended to cover the insured person for the extra expenses they may incur as a result of being temporarily displaced from their home—say, because of a fire or a flood.

Imagine, as an example, that a tornado renders your house uninhabitable, requiring you and your family to relocate for several months until the home has been repaired. ALE coverage helps pay for costs like hotel stays and restaurant meals until you are able to return to your home. Some of the other items provided for under ALE coverage may include:

• Costs of doing laundry—These may be covered if, for example, you have to send your laundry out because you don't have access to a washer and dryer at your temporary home
• Furniture rental—Costs to rent special items you are accustomed to having may be covered and considered
• Storage costs—For contents under special circumstances
• Moving or displacement costs
• Pet boarding

Although the above costs may be covered by ALE, there will always be an assessment of how claimed costs compare to the normal costs of a policyholder's lifestyle. This is because additional living expenses are meant to cover the difference between what you normally pay for things and what you now have to pay, due to the fact that you're not living at home.

What Additional Living Expense Insurance Doesn't Cover

ALE coverage will not pay for damage to your belongings or to the structure of your home, but those should be covered by other elements of your insurance policy. Dwelling and personal property coverage, as well as other elements like liability coverage, are standard inclusions in most homeowners policies.

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