Additional Living Expenses Coverage: How ALE Works in Home Insurance
TL;DR What is additional living expenses (ALE) coverage?
Additional living expenses (ALE) coverage, also known as loss of use coverage, is a standard component of home insurance policies that pays for living expenses on top of your regular costs, such as hotel bills or food delivery fees, that you incur when your home is unlivable due to an insured loss.
You can only file a home insurance claim for additional living expenses if the loss was caused by a covered peril. In most cases, this includes fire, hail or windstorm, and explosion, but not earthquakes or floods (unless you have special coverage extensions).
What does ALE coverage include?
Additional living expenses coverage includes reimbursement or coverage for reasonable necessary expenses that exceed your routine costs for things like housing, food, laundry, pet expenses, and transportation up to your policy’s limits. Coverage details vary, so check your policy or contact your insurance company to understand exactly what your policy may cover.
You may be able to get coverage through ALE for:
- Temporary housing: Hotel bills, long- or short-term rental fees, or daily room and board reimbursement for family or friends hosting you during repairs
- Food: Restaurant meals or food delivery if there’s no kitchen in your temporary accommodations
- Transportation costs: Parking, public transportation, or fuel costs if your temporary lodgings make your commute more expensive
- Pet boarding: Cost of pet boarding if your pets can’t stay in your temporary accommodations
- Utility reconnection: Cost to temporarily pause and reconnect your utilities in the case of long-term repairs
If your claim is approved, your insurance company will either pay the service provider (e.g., hotel) directly for your expenses or send you a cheque to reimburse you for the costs incurred.
What is not covered by additional living expenses?
ALE coverage only applies to additional costs that go above what you’d normally pay for the basic costs of living and are necessitated by a covered loss to your property. It won’t reimburse you for routine expenses you already had, such as groceries, rent, or mortgage payments. It also won’t extend to extra expenses that are unnecessary, such as alcohol or in-room entertainment during your hotel stay.
How long does ALE coverage last?
Your additional living expenses insurance will last until one of two things happens:
- Your home is repaired and you’re able to move back in
- You exhaust your coverage limit
ALE coverage is subject to a maximum limit listed on your policy. This limit is typically set at a percentage of your dwelling coverage (usually 20–30%), but you may see it listed as a dollar amount (e.g., $80,000 or $100,000).
Some policies may also stipulate a time limit for ALE coverage, such as 12 or 24 months. If you meet that time limit without completing repairs or exhausting the monetary limit on your coverage, your insurance provider might refuse to pay any further expenses associated with the claim.
As soon as you know you plan to use your ALE insurance, contact your insurer and ask about all limits that may apply to your coverage. Knowing when and how your coverage may run out can help you plan ahead and manage expenses appropriately.
Additional living expenses coverage: Examples
To understand how an ALE claim might play out in real life, let’s look at three examples.
Maureen’s home is severely damaged when a hail storm caves the roof in, rendering it uninhabitable. She calls her insurance company and learns that her home insurance policy has a limit of $80,000 for additional living expenses—20% of her $400,000 dwelling coverage limit.
It will take roughly two weeks to replace Maureen’s roof and repair all other damage. During that time, her insurance company pays $200/night for a hotel room near her job, which allows her to walk to work. Because the hotel room does not have a kitchenette, she orders food delivery or eats out daily and sends the receipts to her insurance company. Since her hotel doesn’t allow pets, she also files a claim with her insurer for the cost to board her Pomeranian.
Maureen’s total insurance payout: $4,760
Out-of-pocket costs: $0
The Wongs are forced to move out of their home for three weeks due to an evacuation order triggered by severe wildfires in their area. During this time, they stay with family friends a few hours away.
Once they’re out of danger, Mrs. Wong speaks with the family’s insurance adjuster, who explains that their ALE coverage limit is $198,000—30% of their $660,000 dwelling coverage limit. The insurance company agrees to pay a small daily room and board stipend to the Wongs’ hosts, but because their food costs are limited to the same type and amount of groceries they’d usually buy, the insurance company won’t cover those costs. However, they will cover the transportation cost associated with traveling back to the Wong’s home after the evacuation order is lifted.
The Wongs’ total insurance payout: $1,160
Out-of-pocket costs: $0
Jeremy and Tess’s $300,000 home is destroyed by a rogue tornado during an unexpected summer storm. The house will need to be rebuilt from the ground up, and contractors tell them to expect to wait at least 9 months for their home to be livable again.
The couple speaks with their insurance adjuster, who agrees that a long-term rental will be the best solution to their situation. Jeremy and Tess find a furnished rental for $2,200/month, but it’s a 15-minute drive on the highway from Tess’s workplace, which she used to be able to bike to along residential streets. The rental also doesn’t have in-unit laundry, which means they’ll need to pay for a laundromat.
In the end, the rebuild takes 13 months. During that time, Tess and Jeremy’s additional living expenses total $32,000, including $28,600 for rent, $1,400 in added laundry expenses, and $1,300 in added fuel costs. But because the couple set their ALE coverage at just 10% of their dwelling limit in order to save money when they set up their home insurance, their coverage runs out at $30,000, leaving them to pay their remaining costs out of pocket.
Jeremy and Tess’s total insurance payout: $30,000
Out-of-pocket costs: $2,000
How much additional living expenses coverage do you need?
Most home insurance companies in Canada will offer ALE coverage equal to 20–30% of your dwelling coverage limit. For most homeowners, that means a coverage limit between $50,000 and $200,000; however, you may be able to request a higher or lower amount of coverage.
When considering how much ALE to buy, take the following into account:
- Do you have family or friends you could move in with temporarily if your home became uninhabitable?
- How much could your routine food costs increase in the event that you’re unable to stay in your home?
- Do you have pets—and if so, how many?
A licensed insurance advisor can help you estimate the right amount of ALE coverage to include in your home insurance quotes.
Is additional living expenses coverage included in home insurance?
Yes, additional living expenses coverage is included in all homeowners insurance policies in Canada. You can’t waive this coverage and you don’t need to take extra steps to add it, but you may be able to adjust the limit on your coverage.
Common mistakes to avoid with ALE coverage
ALE coverage is one of the less well-understood parts of your home insurance policy. When buying or using this coverage, be careful to avoid these common pitfalls:
- Assuming all extra costs are covered: In reality, you might take on a lot of new costs that won’t all fall under the heading of ALE insurance. Go over all anticipated expenses in detail with your insurance adjuster to understand what is (and isn’t) covered.
- Underestimating how long repairs may take: If a covered loss such as fire or water damage renders your home uninhabitable, buckle in for the long haul. Contractor delays could draw out the financial burden of living outside your home, so be prepared to keep working with your insurer for a while to cover your additional costs.
- Not knowing your policy limits: Don’t book a long-term rental without knowing the maximum amount your ALE insurance covers and confirming that your rental fees won’t exceed that limit.
- Choosing lower limits without understanding the tradeoffs: In reality, lowering your ALE coverage limit from $100,000 to $50,000 might only save you a few dollars a month—but it could mean the difference between peace of mind and a major financial crisis if your home becomes uninhabitable for an extended period.
FAQ: Additional living expenses coverage
This article is for general information only and is not insurance or legal advice. Examples and any sample quotes or rate ranges are illustrative and do not constitute an offer or guarantee of coverage, price, or eligibility. Actual coverage, discounts, and premiums depend on your individual circumstances and the insurer provider; if there is any discrepancy, your policy and insurer documentation govern. For advice about your situation, speak with one of our licensed insurance professionals.