How Additional Living Expense (ALE) Insurance Works

The additional living expense insurance (ALE) kicks in if the policyholder is temporarily displaced due to unexpected incidences like a fire or floods. This policy usually covers 10% to 20% of the home insurance package. Most renter's or homeowner's insurance policies includes ALE coverage.

ALE covers expenses like food plus the cost of living in a hotel until the homeowner can return to his primary dwelling. ALE can cover other expenses like the increase in the monthly food bill due to taking meals out at a restaurant or the loss of income incurred if the insurance holder was renting out a section of their dwelling to a tenant. ALE does not cover things like damages caused to your home's structure or personal belongings. Other elements of your insurance policy will usually cover these.

Additional Living Expense (ALE) Insurance Example

A fierce tornado recently hit the home of Cristiano Andrew, who lives in Houston, Texas. The raging tornado was so intense that Andrew's home—just like his neighbors'—suddenly became uninhabitable. Andrew and his family had no choice but to relocate to a nearby hotel several months after the disaster struck. It took three months to rebuild Andrew's home. Fortunately, Andrew was a policyholder of Additional Living Expense Insurance (ALE). The policy paid for hotel accommodation and food.

The policy also covered the costs of doing laundry at the hotel and renting extra furniture that the family needed to maintain a sense of normalcy in their new environment. Moreover, the ALE covered the costs of moving the items that Andrew could salvage from his home and compensation for the family's displacement. Further, ALE took care of the storage costs of some of the items—including the home generator—at the hotel. It similarly took care of the cost to board their dog.

Before Andrew's insurance company could settle the claim, it sent an agent to assess how the claimed costs compared to the actual costs of Andrew's normal lifestyle. Following the agent's assessment, the company was satisfied that Andrew's claim for ALE fell within the policy plan. In due time, Andrew received his payment for ALE. The compensation helped his family recover from the ravages of the natural disaster as life gradually returned to normal.

Significance of Additional Living Expense (ALE) Insurance

The Additional Living Expense (ALE) insurance coverage is essential for protecting homeowners from the perils of becoming homeless when a disaster strikes and the damaged home is under repair. The policy ensures you receive money that allows you to maintain your regular lifestyle.

Apart from the important financial coverage, ALE coverage gives you the power to maintain your privacy and independence while living in your temporary home. ALE can relieve you from the anxieties of dealing with an unfamiliar situation and protect your family while striving to recover from the ravages of a major disaster. Most insurance companies that offer ALE also have the resources to help you locate a home or rental that is more or less similar to your primary home.

Additional Living Expense (ALE) Insurance vs. Additional Expense Coverage

Additional Living Expense Insurance differs from additional expense coverage in the sense that the latter provides funds to cover expenses over and above what the insurance policyholder was actually paying before he made a claim. If it meets specific conditions, an insurance company can provide funds to a policyholder with a set maximum time before the claimant can receive it. The package also includes a policy limit on the exact amount of coverage the company will settle.