Additional Living Expense (ALE) Claims
HERE’S A SUPER IMPORTANT A.L.E. TIP!
Over the past few years, wildfires in the Western United States have been horrendous, displacing tens of thousands of people from their homes and businesses, and causing billions of dollars in fire damages. But what happens when the local authorities force you to evaluate when fire gets too close?
There’s coverage in the ALE portion of the policy! I promise that the insurance companies are not running radio and TV ads, alerting their policyholders about THIS coverage!
Here’s a exact quote from the ISO homeowners policy:
“If a civil authority prohibits you from use of the “residence premises” as a result of direct damage to neighboring premises by a Peril Insured Against in this policy, We cover the Additional Living Expense and Fair Rental Value loss…..for no more than two weeks.” (1)
In a Homeowner insurance policy, you’ll usually see ALE coverage listed as Coverage D. Sometimes, it’s called Loss of Use.
Additional Living Expense (ALE) coverage is just what you might think it is. When you have a covered loss that makes the place you reside unfit to live in, and it forces you to spend more on normal operating costs than you usually spend, ALE coverage pays.
Your policy probably reads just like the following: “Additional Living Expense, meaning any necessary increases in living expenses incurred by you so that your household can maintain its normal standard of living.”
ALE covers things like:
a. Temporary housing, like in a hotel, an apartment or rental house. If you lived in a modest home, don’t expect the insurance company to pay for the finest hotel room in town. But on the other hand, if you lived in an expensive home, you should EXPECT AND DEMAND that the insurance company pay for temporary accommodations of like kind and quality. Remember, if you had a mortgage on your home, you still have to pay the mortgage payment while the home is being repaired. Lots of times the loss is severe and the adjuster knows you’ll be out of your home for weeks or months. The insurance company will save money if it places your family in an extended stay hotel, or in a short term apartment or house lease. In addition to saving money on rent, the insurance company can pay advances on Contents, and if you’re in an apartment or house, you’ll have a place to store your new contents, like furniture, clothing and kitchenware.
b. Laundry and dry cleaning. If you had laundry facilities at your residence, it will cost you more to get your clothes cleaned. The extra cost you incur is covered.
c. Meals. This is where many people misunderstand their claim. Certainly, if you cannot buy and prepare your own meals, you’ll incur higher food prices. But insurance companies won’t usually pay for costly steak dinners and high bar tabs. You’re going to have to be able to explain your meal purchases, so don’t go overboard. You’ll have to make an accurate estimate of what your family normally spends per month on food. That can certainly include restaurant meals that you normally buy. Just remember that ALE is paying for items OVER your normal standard of living. Keep METICULOUS RECORDS of your food purchases. If the insurance company places you into a temporary apartment or efficiency hotel that has a kitchen, they’ll stop paying for most extra meals.
d. Boarding costs for pets. Someone has to take care of your pets while you cannot live in your home. This is covered.
e. Increased transportation costs for all your vehicles. Do you have to drive your children to school, since your temporary accommodations are not in the old school district? That’s covered. Do you have to drive further to and from work? Covered. Do you have further to drive to doctors, dentists, ballet classes, soccer games, etc.? The increased cost is covered. Did I say KEEP METICULOUS RECORDS? Most office supply stores have automobile expense logbooks for sale for a dollar or two. Stop by and pick up one for each car you drive, and write down EVERY TRIP. Keep all receipts for every penny you spend on transportation.
f. Furniture rental for a temporary residence. You have to have chairs and beds and other stuff…even pots and pans, dishes and temporary electronics. However, don’t try to get them to pay for a 60″ plasma flat screen TV rental if you had a 27″ color TV at home.
g. Relocation and storage expenses. Perhaps some of your personal property was not damaged. Perhaps some was damaged, but the restoration contractor is cleaning and repairing it. Once it’s cleaned and repaired, it’s got to be stored somewhere until you can move back home. Covered.
h. Costs of telephone or utility installation at your temporary residence. This would include deposits that the utility companies might require. Don’t forget garbage pickup at your temporary place. It’s all covered. Even cable TV hookups would be covered if you had cable at home prior to the loss.
What if you stayed with relatives, and did not incur increased rent, and many of the other expenses shown above? Another scenario is that you just simply do not want to go through the process of documenting all of your extra expenses. The policy gives you the option to be paid “Fair Rental Value”, which is: “the fair rental value of that part of the ‘residence premises’ where you reside less any expenses that do not continue while the premises is not fit to live in.”
How much would your house rent for? That’s the question.
You’ll need to make a comparison between your residence, like it was before the loss, and properties in the neighborhood that are comparable to yours. A good real estate broker can be very helpful in substantiating these comparable properties and the monthly costs of them. Once you determine the Fair Rental Value of your home, you must subtract expenses that do not continue during the restoration period, such as some utilities, garbage pickup, landscaping services or maid services.
Some insurance companies will still pay for extra transportation costs, relocation expenses, storage of contents and utilities in addition to Fair Rental Value. Some will make you choose either ALE or Fair Rental Value. Find out from your insurance company what they are going to do, and make your decision.
Go to the website listed in the Resource Box below and find the Resources tab. Download the ALE worksheet and make as many copies as you need. Use it as your guide to record and submit your ALE claim.
If your records and receipts were damaged in your loss, contact your utility companies, credit card companies and other creditors and get copies of the last couple months’ bills. You’ll need these records to confirm your normal operating expenses.
Finally: Don’t be surprised if your adjuster or claims examiner tries to disqualify some of your legitimate expenses. Don’t just accept what the adjuster says. If it’s a truly legitimate expense, FIGHT FOR IT! Go over the adjuster’s head to his supervisor. Keep fighting. Send them a letter that insists that they give you written denial of any legitimate expenses. Once you have that in your possession, call your state Department of Insurance (DOI) and register a written complaint. You never know what impact a DOI complaint will have on your claim.
(1) Insurance Service Office, Inc., “CPCU Handbook of Insurance Policies,” 2005.
Copyright 2008 by Russell D. Longcore