Additional living expenses coverage explained

This is general information. Limits, conditions and wording vary between policies, so confirm the details with your adjuster or broker.

What it is

When a fire, a burst pipe or another insured loss makes your home unfit to live in, you still have to live somewhere. Additional living expenses coverage, often shortened to ALE, is the part of a home, condo or tenant policy that pays the extra cost.

The important word is additional. The coverage pays the difference between what you normally spend and what you have to spend because of the loss. It is meant to keep your household at its usual standard of living, not to pay for costs you would have had anyway.

When it applies

Generally, three things have to be true:

1. The damage was caused by something the policy covers.
2. The home is unfit to live in, or you have had to move out while repairs are made.
3. The expenses are reasonable and necessary.

Most policies also provide a short period of cover if a civil authority orders you to leave because of a threat to your area, such as an evacuation. The conditions and time limits differ, so check your wording.

Inconvenience alone usually is not enough. Losing one bathroom in a house with two may not make the home unfit. Having no kitchen, no heat in winter, no working toilet, or contamination from sewage or smoke usually does. Raise it with the adjuster before you book anything.

What it usually pays for

• A hotel, and then a rental of similar size and quality to your home for longer repairs
• The extra cost of meals when you have no kitchen: what you spend less what you would normally spend on groceries
• Extra travel to work and school
• Laundry, if you have no machines
• Moving your belongings out and back, and storage
• Boarding pets, if the temporary place does not allow them
• Parking, and utility connection fees at a rental
• Furniture rental for an unfurnished unit

What it does not pay for

• Your mortgage, rent, property tax and insurance premiums at the damaged home. Those are normal costs and continue.
• Your usual grocery bill, fuel and other everyday spending
• Costs beyond what is reasonable, such as accommodation well above your usual standard
• Expenses after the home is fit to live in again, or after the limit or time period runs out
• Losses that are not covered. If the water damage claim itself is denied, ALE generally does not apply.

Savings count too. If your utility bills at home fall while you are away, some insurers take that into account.

How much, and for how long

It depends on the policy. The limit may be a percentage of the dwelling or contents coverage, a fixed amount, or in some policies the actual cost for a reasonable period. Tenant and condo policies often link it to the contents limit.

Coverage normally lasts for the reasonable time needed to repair or rebuild, or for you to settle elsewhere if you are not returning, up to the limit. Long repairs can use up a limit. Ask your adjuster early what your limit is and how long the repair is expected to take, so that you can plan your accommodation to fit.

How to claim

1. Tell the adjuster you need to move out and get their agreement before committing to accommodation, where time allows. In an emergency, go somewhere safe and reasonable and call as soon as you can.
2. Ask whether the insurer can arrange accommodation and pay for it directly. Many work with housing companies that find short-term rentals.
3. Ask for an advance if you need money for immediate costs. Insurers can often provide one.
4. Keep every receipt, and note what each was for.
5. Work out your normal costs, such as your usual monthly grocery spending, so that the extra can be calculated.
6. Submit expenses regularly rather than at the end.
7. Get approvals in writing, especially for a lease, storage or anything unusual.

Hotel or rental?

A hotel suits the first days. For repairs lasting more than a few weeks, a furnished rental with a kitchen is usually better for the household and cheaper for the claim, because meal costs fall. Before signing a lease, check that its length fits the expected repair time and that the insurer has agreed to it.

Try to stay close to work and school. Extra travel is claimable, but less disruption is better.

Landlords and tenants

Tenants. Your landlord’s insurance does not cover your living costs. Your own tenant policy does, if you have one. Under Ontario’s Residential Tenancies Act there are rules about rent and your tenancy when a unit cannot be lived in. The Landlord and Tenant Board publishes guidance, and a legal clinic can advise.

Landlords. A rented property policy can include coverage for lost rental income, sometimes called fair rental value, while the unit cannot be occupied because of an insured loss.

How restoration affects it

The length of the repair drives the cost of the ALE claim, so the insurer and you both want an accurate schedule. A restoration contractor should be able to tell you:

• Whether the home is safe to stay in during drying or cleaning
• Which parts of the house will be out of use, and for how long
• When services such as water, power and heat will be back
• The expected date you can move back

Sometimes part of a house can be made safe and usable so that a family can stay. Sometimes, with sewage, heavy smoke, asbestos work or major demolition, moving out is the only sensible option.

More: fire damage restoration and water damage restoration.