Additional living expenses – what’s covered?
Also known as ALE, additional living expenses coverage protects you against out-of-pocket costs if you’re unable to live in your home because of damages that are covered under your home insurance policy.
Most Ontario home insurance policies provide three categories of ALE coverage:
Additional living expenses: This helps to reduce the financial burden related to living away from your home while repairs are being made by covering expenses you normally wouldn’t have such as:
- Hotel bills
- Restaurant meals
- Pet boarding
- Storage for your stuff
Remember to keep all your receipts, and speak with your broker for more details on coverage.
- Fair rental value: If you rent out a portion of your home (such as a room, apartment or suite) and your rental unit is unlivable because of an insured event, your home insurance policy may pay for lost rental income. Ask your broker if you require this coverage as it is not standard.
- Prohibited access: If you are forced to leave your home because of an emergency in your neighbourhood or a government evacuation notice during a natural disaster, you may be able to claim ALE – even if there’s no damage to your home.
In most cases, the combined total ALE limit for all of the above three categories is 20% – 30% of the replacement cost coverage on your home insurance policy. So for example, if the replacement value of your home is listed on your policy as $500,000, the maximum additional living expenses coverage would be $100,000 – $150,000. Typically, you would only come close to these limits is if your home needs to be rebuilt from the ground up.
When does additional living expense coverage apply?
Generally speaking, eligibility for ALE is activated under most insurance policies when an unexpected event damages your home and makes it unlivable.
For example, if your home has been damaged by fire or fire-related damage such as flooding caused by fire hoses, you would be covered under ALE from the time the fire occurred right up until you were able to move back in.
Additional living expense coverage may also be activated in special circumstances that prevent you and your family from residing in your home, such as an emergency evacuation order issued by a municipal, provincial, or federal authority. You could be ordered to evacuate your home due to widespread flooding, forest fires, or a catastrophic event such as a chemical spill in your neighbourhood.
For details on the specific situations and events that will trigger additional living expense coverage on your policy, contact one of our brokers here at Mitch. We’ll help you understand your existing coverage, review quotes, and find the right protection for you and your family.
Common questions about additional living expenses coverage
How are additional living expenses calculated?
Additional living expense coverage will cover any additional costs if you and your family are forced to leave your home temporarily due to an insured loss, or if you are unable to access your home because of a government evacuation order or sometimes due to damage to a neighbouring property.
This coverage is usually limited to a maximum of 20 – 30% of the replacement value of the home, as listed in the policy, or 12 months. It’s meant to pay for comparable accommodations to what you are used to, so it likely won’t cover a five-star hotel or meals at a five-star restaurant.
If you need to leave your home due to an insured loss or evacuation order, your additional living expense coverage will typically reimburse you the cost of a short-term rental or hotel accommodations, plus meals, laundry, and possibly even pet boarding, furniture storage and mileage put on your vehicle.
It’s very important to note that the coverage is for “additional” expenses, so if you usually spend $1,500 a month for food (groceries), and it costs $3,200 while you are displaced because you need to order in, , you will be reimbursed $3,200 minus the $1,500you would have spent if you were at home. The same applies to mileage. You will only be reimbursed for mileage if your relocation requires you to drive more than you normally would.
What is a reasonable amount to claim for additional living expenses?
There will be an overall dollar limit in your policy that is usually 20-30% of the rebuild value of your home. That could be as much as $150,000, but the insurance company will expect you to be as economical as you can.
So if you’re out of your home for three weeks, you may be able to claim a hotel room for that time, but if you’re out for six months, you’ll have to arrange a short-term rental to keep costs down.
Likewise with food. Insurance may pay for restaurant meals for a short time, but beyond a few weeks, you’ll have to find a way to prepare meals like you would at home.
When you start your claim, you can speak to your adjuster about what housing options are available to you, how long you’re likely to be out of your home, and what your costs are likely to be.
Are additional living expenses the same as loss of use?
Yes. They are two names for the same thing. Typically called additional living expenses coverage in Canada, this helps homeowners cover additional expenses if they are forced to live away from their home while repairs are underway after an insured loss.
What is the difference between fair rental value and additional living expenses?
Fair rental value is a coverage that may be included in your home insurance policy under the same section as additional living expenses. Fair rental value coverage reimburses you for lost rental income if your home suffers an insured loss that forces your tenants out.
Note that fair rental value is not a standard coverage, and will only be included if you let your broker know that you rent out a portion of your home. When it comes time to make a claim, you may need proof that you were renting out all or part of the property at the time of the loss.