Most home insurance policies provide coverage for additional living expenses (ALE). ALE pays for additional costs you may incur when your house gets damaged, and you have to live elsewhere until it is repaired. However, this useful part of homeowners insurance isn't well understood. Here are three things you may not know about ALE:
What the Coverage Pays for
The first thing you should know is that ALE doesn't pay for all of your expenses while you are temporarily living outside your home. It only caters for the additional expenses, the ones that you wouldn't have incurred if you were still living in your place.
For example, it will not pay for your kid's tuition since those aren't additional expenses; you would have incurred them even at home. If your temporary abode has a kitchen, ALE will not pay for your meals since those aren't additional expenses. However, it should pay for your commute if you have to drive farther to work or for your utility bills if they are higher at your temporary residence compared to you normal home.
The Risks Covered by Your Insurance
Secondly, you need to understand exactly what your homeowners insurance cover because ALE will only kick in if the damage that caused you to move out of your home is also covered. For example, if your coverage doesn't include flood damage, ALE will not help you when a flood forces you out of your home. Therefore, scrutinize your policy to have a thorough idea of the coverage and its exclusions.
The Limits of Your Coverage
Lastly, you know that ALE coverage does have its limits, just like other forms of insurance. The size of your homeowners insurance coverage dictates how much ALE you get. Most insurers set ALE limits as a percentage of your overall home insurance coverage limit. For example, if your home is insured for $300,000, the ALE limit may be 20% of that, which comes to $60,000. There may also be a time limit; for example, you may be required to spend the $60,000 within a year. This will help you budget properly during your time outside your home.
Review your homeowner's insurance today, and confirm that the ALE coverage may be enough to pay your additional expenses in case you have to live outside your home for a while. Consult your insurer or agent if you don't know how much ALE you are entitled to.
After I moved out of my parent's home, I started learning more and more about insurance policies. I was involved in a bad car accident, and I ended up working with my car insurance company as well as my medical and dental insurance companies. I paid my premiums and enjoyed coverage, but I didn't really understand how the entire insurance claim process worked. I wanted to make this blog to help other people like me to learn more about insurance coverage. Check out this blog for more details on insurance coverage, how to file a claim, and what you should expect throughout the shopping process.