Welcome to our FAQ on additional living expenses (ALE) insurance coverage! If you’re a homeowner’s insurance policyholder, you may have come across the term “ALE” and are wondering what it means and how it can help you in the event of a covered loss. In this blog, we’ll provide a detailed explanation of ALE coverage, including what types of expenses it typically covers, any limits that may apply, and how to properly document your ALE expenses.
What is additional living expense (ALE) coverage?
Additional living expenses (ALE) coverage is a type of insurance that helps policyholders cover the costs of temporary housing and other expenses that may arise when a covered loss makes their home uninhabitable. It’s often found in Coverage D of your homeowner’s insurance policy, which your policy may describe as “Loss of Use.” ALE coverage can provide reimbursement for expenses like hotel stays, restaurant meals, laundry, and other expenses that you wouldn’t normally incur if your home was still livable.
ALE coverage is typically included in a standard homeowner’s insurance policy, but the amount of coverage and the types of losses that are covered may vary depending on your policy. Some policies may provide a fixed amount of ALE coverage, while others may provide a percentage of your dwelling coverage.
What types of expenses does additional living expenses typically cover?
As mentioned above, ALE coverage typically helps policyholders cover the costs of temporary housing and other expenses that may arise when their home is uninhabitable due to a covered loss. Some examples of expenses that may be covered by ALE coverage include:
- Hotel or motel stays
- Restaurant meals
- Laundry expenses
- Temporary storage of your household items
- Additional transportation costs (e.g., car rentals, gas, etc.)
- Phone and internet service fees
- Pet boarding fees
Note that the specific types of expenses covered by ALE may vary depending on your policy and the specific circumstances of your loss. It’s important to carefully review your policy and speak with your insurance company to understand exactly what is covered under your ALE coverage.
Are there limits to additional living expenses coverage?
Yes, there are usually limits to ALE coverage. These limits may include:
- A maximum amount of coverage: Your policy may specify a maximum amount of ALE coverage that you can receive. For example, your policy may provide up to $5,000 in ALE coverage.
- A time limit: Your policy may also specify a time limit for ALE coverage. This means that you can only receive ALE coverage for a certain period of time after your loss. For example, your policy may provide ALE coverage for up to 12 months after your loss.
- Exclusions: Your policy may exclude certain types of expenses from ALE coverage. For example, your policy may not cover the cost of meals that are more expensive than what you would normally pay at home.
It’s important to understand these limits and exclusions so that you know what to expect in terms of the amount of ALE coverage you can receive and the types of expenses that are covered.
How do I properly document my additional living expenses?
If you need to use your ALE coverage, it’s important to document your expenses carefully to ensure that you can get reimbursed for all of the covered expenses you incur. Here are some tips for properly documenting your ALE expenses:
- Gather receipts: To get reimbursed for your ALE expenses, you need to show your insurer copies of receipts or other forms of proof of purchase. The best practice is to save all your receipts while you’re away from your home, not just those for hotel stays and food. Your policy may cover other types of expense (see above), and you don’t want to miss out on those reimbursements.
- Track and organize your expenses: In addition to saving your receipts, it’s also a good idea to keep a running tally of your ALE expenses. Not only will this give you a head start when it comes time to submit your expenses to your insurer for reimbursement, but it will also help monitor how your spending compares with your coverage limits.
All of this information will likely find its way into a Proof of Loss document. Looking for an easier way to track and submit ALE expenses? Try Brelly’s Claim Manager. It’s free, and it gets you paid fast.
How do I get reimbursed for additional living expenses?
To get reimbursed for your ALE expenses, the first thing to do is file a claim with your insurance company. To do this, you’ll need to provide the expense documentation discussed above (receipts, invoices, and any other proof of payment). You may also need to explain the nature of the expense. Sometimes no explanation is needed because the receipt makes it obvious (think a McDonald’s receipt). But for less descriptive receipts, you should add an explanation so your insurance company understands why it’s eligible for ALE coverage. Finally, you may need to provide a detailed explanation of the circumstances that led to your need for ALE coverage, such as the type of loss that occurred and how it made your home uninhabitable.
Once you’ve organized all your documentation, it’s time to package it together and submit it to your insurance company. Different insurers give you different options for submitting your expenses, but email is common to most insurers. The work to document, track, and submit ALE expenses can be exhausting. That’s why we designed the expense tracker in our free Claim Manager. It keeps track of your expenses and automatically generates polished expense reports that are ready for your insurance company.
However you submit them, you should submit your expenses early and submit them often. Unlike repairs to your home, which your insurance company may not fully reimburse until the work is complete, additional living expenses are eligible for immediate reimbursement, even if you’re continuing to accrue new expenses. So don’t delay in submitting ALE expense reports.
Are insurance payments for additional living expenses taxable?
Typically not, at least for federal income taxes. Congress created a special section in the tax code that excludes from your taxable income insurance reimbursements for additional living expenses. In other words, the money you receive from your insurance company under your ALE coverage is not income that you need to report to the federal government. The exclusion applies only to individuals who cannot live in their primary residence, and it doesn’t cover reimbursements that are more than the normal living expenses you and your family members would have incurred during the period when your home isn’t livable.
In general, it’s always a good idea to consult with a tax professional or the Internal Revenue Service (IRS) to confirm whether your specific situation is taxable.
Does my mortgage bank receive my additional living expense reimbursement checks?
Usually not. Although it’s possible, most policies — and many state laws — provide that insurance reimbursements for additional living expenses are sent directly to you, and not to the bank that has a mortgage on your house. The reason is that in most cases, your mortgage bank has a legal interest in your house (and sometimes your personal belongings), but not the personal expenses you incur because your home isn’t tenantable (livable).
