Updated: Oct 6, 2022
Keeping track of Additional Living Expenses following a CAT event or claim can be difficult. It can seem like expenses and emails fly back and forth between adjusters, insurance companies, and contractors. Often expenses and approvals are lost in the shuffle, as a policyholder you can be stuck with the check if not properly recorded and reported.
At Catale, we built an “ALE worksheet” & “ALE tracker” to help manage your expenses and displacement expenses. We help adjusters and policyholders keep clear and open communication as a claim progresses.
How does additional living expenses work?
ALE, also known as additional living expenses, is a clause written into most homeowner’s insurance policies to provide homeowners with resources when their home is destroyed by a natural disaster. ALE covers policyholder displacement costs everything from hotels, rental homes, and travel trailers. Typically, ALE is 20% of your home's valuation. It is important to keep track of your expenses and make sure everything is approved by your adjuster. The easiest way to find your ALE valuation is to reach out to your agent, or whomever sold you your homeowner’s policy and ask.
What is included in additional living expenses?
Additional Living Expense Coverage, also known as ALE, typically includes hotel stays, rental homes, apartments, condominiums, and even travel trailers. ALE is here to help you take the next steps forward following the damage or destruction of your home. ALE also covers transportation costs, laundry costs, pet boarding, food costs, and furniture rental. Your expenses are approved by your adjuster, who gets the approval from the insurance company. Additional living expenses cash out is another way to utilize your insurance policy and resources.
You can have the insurance carrier cut you a single check and use the resources as you deem best. Oftentimes policyholders find that it is not enough money to make it the duration of the claim. An adjuster can adjust your ALE spend and give you more resources to cover costs, if your project runs longer than predicted.
Additional Living Expenses Examples:
When the unexpected happens to your home and you find you and your family displaced, immediately start the process of keeping track of expenses that have been incurred to maintain the comparable standard level of living. ALE reimbursement from insurance companies requires receipts and details as to what the policyholder has spent on certain items and services that they are expecting to be repaid on. One of the most common additional living expenses is for food. When a fire takes out the kitchen in a home, leaving a family without a way to cook meals for their family, meals purchased from restaurants will be required until temporary housing with a kitchen is set up and available for daily use. We have worked with policyholders during the first days of the claim to remind them to keep receipts and organize them in a way that will ensure quick reimbursement. These reimbursed funds are deducted from the overall ALE coverage that their homeowner policy offers.
How long does additional living expenses last?
The length of time that additional living expenses last is dependent upon each homeowner's policy coverage. The key is to check your policy for accurate coverages as some policies do have a time limit for when ALE can be utilized after the covered peril occurs, while other polices allow for an ALE utilization to occur in perpetuity.Additional living expenses vs. Loss of use terms are used interchangeably and have the same meaning. Most homeowner’s policies provide ALE coverage or loss of use coverage for approximately 20% of the dwellings value. There is typically a set value to the ALE limit in a policy. Knowing this limit and keeping track of what expenses have occurred will be critical as to how long the actual ALE will cover your displacement.
Are additional living expenses taxable?
ALE payments received after a claim for a covered peril are monies that are not taxable. An ALE payout would not be considered additional income as it covers expenses to maintain the normal standard of living after a home is damaged or destroyed. ALE insurance claims allow for the policyholder to provide receipts for expenses incurred post a home claim where the rebuild requires the homeowner to leave their home for any given time. The reimbursements the policyholder receives from the ALE insurance claims is money not taxable.