Additional Living Expense (ALE) Coverage vs. Loss of use vs. Fair Rental Value
Updated: Sep 2, 2022
When it comes to understanding homeowner’s insurance services and coverage, most people do not fully understand the options available to them until the unthinkable happens. Natural disasters, fires, burst pipes, and overflowing dishwashers are all part of owning a home. Before disaster strikes it is important to be knowledgeable and up to date on your policy and the services you can receive.
When your home is damaged or destroyed the use of your additional living expenses can be one of the most powerful tools to get the most out of your policy and help you rebuild both your life and home.
What is Additional Living Expense Coverage (ALE)?
ALE coverage is a clause in most homeowner’s insurance policies that provides compensation to cover additional living expenses, such as temporary housing, following significant damage to your home, where it is deemed unlivable. Insurance companies provide funds to your family during your time of displacement to pay for expenses that are being incurred to resume normal living conditions while your home is being repaired. These funds are in addition to the funds used to pay for repairs to your home. ALE insurance claims can look very different depending on the valuation of your home, your current needs, and the extent of the damage.
ALE insurance housing can vary from nightly or monthly hotel stays, multiple months in a travel trailer, to whole home rental for years. Each policy’s ALE is paid out by insurance companies to the displaced insured, but there are stringent requirements and regulations for the allocation of this money. ALE insurance is typically calculated by insurance carriers by taking 10-20% of your home valuation. Extensions and additional funds can be allocated upon the approval of the adjuster and the insurance carrier. All spending approvals and reimbursements go through the adjuster assigned to the policyholder once the claim has been filed. There is no deductible for your ALE coverage as it is a portion of your homeowner policy.
Is Additional Living Expenses the same as Loss of Use?
Is ALE the same as Loss of Use? The answer to that question is yes, they are oftentimes interchangeable. ALE covers you and your family's housing and living expenses while you are displaced from your home. For example, ALE can cover your hotel stay, your dog being boarded, or the additional mileage accrued from driving further to work and school.
How do you calculate Loss of Use of a home? Typically a policyholder's ALE is 20% of their home valuation and the adjuster looks at the damage to the structure and determines if the home is unlivable. The Insurance Adjuster then proceeds to activate the ALE policy to help the policyholder find housing solutions that cater to their exact needs. Additional Living Expenses are present in almost every homeowner’s policy to act as a safety net and provide resources to help the family while they rebuild their home and life.
What is Fair Rental Value vs. Additional Living Expense Coverage?
To explain how Fair Rental Value vs additional living expense relate to one another, insurance companies are in business to watch their bottom line just as any other business. They must make sure that they are doing their due diligence to be paying a fair market value for any commodity. In this case, it’s housing. The Fair Rental Value gives the insurance company a list of other comparable rental properties in the area that are currently available for rent so that they can compare what is being asked in way of compensation, via additional living expense reimbursement, is on par with the rest of the rental market. When a claim is filed by a landlord, a study will also be conducted of the local rental options to see what the Fair Rental Value vs loss of rents fair market value is currently selling at as well.
What do insurance companies count as Living Expenses?
Additional living expense coverage pays for anything your family might need during a time of long-term displacement. Housing is one of the larger aspects that typically make up ALE spend. Typically, additional living expenses are calculated by taking 20% of your dwelling coverage, these are outlined in your homeowner’s policy.
Hotel or temporary rental costs –
Hotels and temporary rentals are covered by ALE coverage. Hotel stays can range from 2 weeks to 12 weeks. For stays with longer repair times, temporary rentals are also covered to make your coverage last longer. At Catale, we have a national network of hotels and landlords that can place you in all 50 states following a housing claim.
Utilities are covered by ALE coverage, typically these are included in the monthly rental housing costs, or the policyholder will be reimbursed by the insurance company.
Restaurant meals –
Meals while you are displaced, if approved by your adjuster, are an acceptable spend of your ALE coverage.
If you must drive further to work or school, or take an additional bus, due to the destruction of your home, this can be included in your ALE coverage, it's important to discuss with your adjuster as to what will be approved for coverage.
Laundry costs –
If laundry is not available at your temporary accommodation, then yes laundry costs would be included. At Catale, we can help facilitate laundry machine rentals or help with locating laundry machines.
Boarding costs for a pet-
Pet boarding can be included as an acceptable expense for ALE coverage. Whether covering pet fees or boarding them at a nearby kennel, we can work with you at Catale to ensure that your furry friend is cared for during this time.
Storage fees are accepted uses of funds, as you might need a place to store your living room furniture following a main floor remodel due to a kitchen fire.
Lost Rental Income from Tenants-
Typically ALE coverages are more geared toward homeowners than landlords. Typically, a landlord’s umbrella policy or commercial insurance would cover their losses.
Travel Trailer Rentals -
Yes, travel trailers are an acceptable temporary housing option. Typically on-site temporary housing works best for policyholders in rural areas, farms, or policyholders wanting close proximity to their project or property.
Can you get loss of use reimbursement from an insurance company when staying with a friend or relative?
Yes, you can get loss of use reimbursement when staying with a family or relative. Keep in mind that the reimbursement must show that you are paying more than normal living expenses. For example, you have to drive an additional 20 miles daily to get your kids to school and yourself to work due to the location of the friend or relatives' home, you are able to turn in receipts for the additional mileage and fuel costs to cover this extra daily expense.
What expense are not covered by ALE?
Additional Living Expenses can cover many different items, but there are limits. Everyone should reference their declarations page of their homeowner policy for additional living expenses examples, and guidelines on coverage. For example, an extravagant meal may only be reimbursed for a small percentage of the total bill depending on what your insurance policy has declared as a reasonable cost.
What types of temporary housing options are covered by homeowners insurance?
A wide array of housing options can be covered by homeowners' insurance ranging from hotel stays, apartment and condo rentals, as well as single family homes. Your insurance could also cover a travel trailer, which can be a viable housing solution. Your solution can be determined by the size of your ALE budget, scale of damage, and repair timeline. It can range anywhere from covering a short term emergency lasting weeks or longer displacements of months or even years. At Catale, we have a wide portfolio of housing options ready for you to explore.
Temporary Housing -
None of us want to think about “living” in a hotel for an extended period of time. Catale has built an extensive landlord network across the US, vetted and screened through our Catale Preferred Landlord Network, to ensure safe, viable accommodations for our clients. When it comes to furnishings, housewares, and even your pets, we’ve got you covered. Let Catale take housing worries off your plate.
Emergency Hotel Placement -
Catale partners with numerous national and international hotels to be prepared immediately following a CAT event. We provide emergency service, lodging solutions for policyholders, adjusters, and traveling crews. With industry-leading access, we can reach our clients in an hour or less. Our team prides itself on offering a wide selection of clean, safe, and cost-effective hotels.
Temporary On-Site Trailers -
Catale's Travel Trailer offering is just one way we can offer creative and unique housing solutions to our customers. Whether your home in the Colorado mountains was destroyed in a fire or being part of a crew working on a remote job site in Nevada, we have solutions that can fit any budget and any need. We handle everything from delivery, set up/pick-up, and even the regular maintenance on the trailer. We can place a trailer at your home or in a nearby campground. We work to set up the electric hookup, water, and waste.
Cat Team Lodging & Accommodations -
If you are a restoration crew deploying to help rebuild a community or a construction crew traveling to projects, let Catale handle your housing. We know what it is like to travel as a crew. We make it painless. Let Catale take housing off your plate.
What is the limit of additional living expenses?
An ALE limit is the amount of compensation your homeowner policy covers when your home becomes unlivable. This amount is typically around 20% of the total dwelling coverage in your policy. Since there is a limit, we highly recommend that an additional living expenses worksheet is created to aid in the reimbursement process. This worksheet will help track what funds have been spent so far, and what funds are remaining. Although uncommon, an additional living expenses cash out is an option during a claim. Most insurance companies only want to reimburse expenses that have been incurred, but there are some cases where the insurance company will cash out their ALE coverage directly to the policyholder.
The Manning Family didn't worry about housing because they worked with CATALE
The Manning family was displaced from their home following a kitchen fire which engulfed the entire home. The Manning’s adjuster reached out to the Catale team to find emergency housing that could fit the family of 5. That night we found a hotel within a mile of the home, so the children could be close to school. While the family was getting settled into their home our team went to work evaluating the project timeline and developing a housing plan for the family. We began our search while building a Fair Rental Valuation model that helped our team find approved like, kind housing for the family. We communicated our findings with the insurance adjuster to ensure that they were kept up to speed. We worked with the family to ensure that they had a big enough backyard for their 10-year-old, 7-year-old, and 3-year-old to run off all their energy. Moreover, Catale made sure the home had a home office that was large enough for Mrs. Manning to work remotely and not worry about interruption from the children during the day. The Manning family stated, “Housing was something we didn’t even have to think about. It was seamless, we just showed up! The Catale team made it so we didn’t have to worry and we could focus on our family.”