When an unpredictable peril unexpectedly makes your home unsafe to live in, you might be quick to think about how to repair the damage and replace your lost belongings. Once the initial shock has passed, the next, arguably more pressing matter to figure out is: where will you sleep that night?
Fortunately, those with tenant, condo, and home insurance can breathe a sigh of relief knowing that this is precisely what additional living expenses (ALE) coverage is designed for. It eases the stress and uncertainty of not knowing where you’ll live or how you’ll manage the additional costs, which can be overwhelming, especially if you’re not financially prepared to handle them.
If you’re not as familiar with additional living expenses coverage as you’d like to be, this article is a must-read. Not only does it include information about how ALE works and what it covers, but it also answers several other commonly asked questions.
What Is Additional Living Expenses Coverage?
Additional living expenses (ALE) coverage provides financial assistance should your home, condo, or rental unit become uninhabitable due to a covered peril, such as a fire. It helps cover the extra costs you would otherwise have to pay out of pocket if you didn’t have insurance. This includes hotel bills, restaurant meals, and other everyday living expenses, which can quickly add up to hundreds, if not thousands, of dollars.
Fortunately, when you buy home insurance, condo insurance, and tenant insurance in Canada, additional living expenses coverage is typically included as a standard component.
What Does Additional Living Expenses Coverage Pay For?
The purpose of additional living expenses coverage is to help cover your everyday living costs while you are displaced. As such, ALE coverage may cover and help pay for the following expenses:
- Hotel stays
- Rent for temporary rental accommodations
- Utility bills for temporary residence
- Restaurant meals
- Food expenses
- Laundry expenses
- Travel expenses
- Mileage and transportation costs
- Gas expenses incurred due to displacement
- Moving costs
- Pet accommodations
- Storage fees
Naturally, like any insurance policy, there are likely going to be some exclusions. While these exclusions will slightly differ from policy to policy, here are some of the things that additional living expenses coverage typically does not cover.
- Non-Essential Expenses: Expenses that are considered non-essential or extravagant (ex. Luxury hotel accommodations, entertainment expenses, or unnecessary upgrades to temporary housing)
- Normal Living Expenses: Expenses that you would normally incur while living in your home (ex. Personal care items, household maintenance expenses)
- Expenses Exceeding Coverage Limits: Expenses that exceed the maximum coverage limit specified in your policy
- Post-Restoration Expenses: Expenses incurred after your home is restored to a habitable condition
- Belongings Replacement: Expenses for the repair or replacement of your belongings, as these are usually covered by contents insurance (ex. Electronics, furniture)
Additional Living Expenses vs. Loss of Use
Since you’re likely to come across the terms additional living expenses and loss of use, it’s important to be aware of what each means and the subtle differences.
Additional living expenses coverage is a specific feature within homeowners, renters, or condo insurance policies, designed to reimburse policyholders for additional living expenses incurred when their home is temporarily uninhabitable due to a covered peril.
Loss of use, on the other hand, is a broader insurance term that is used beyond residential properties. It applies to situations where damage or loss renders property, vehicles, body parts, and other assets unusable for their intended purpose.
In short, while ALE focuses on temporary living expenses, loss of use encompasses a wider range of situations where access or functionality is lost or severely limited.
How Does Additional Living Expenses Coverage Work?
No one wants to end up in a situation where additional living expenses coverage needs to be used. However, since it can and unfortunately does happen, you might like to have a general sense of what to expect just in case. As such, here’s a step-by-step breakdown of how additional living expense coverage typically works in Canada.
- Find temporary accommodations
- Keep track of your expenses
- Contact your insurance company
- Submit documentation
- Wait for approval
- Continue keeping records
- Settle the claim
Step 1: Find Temporary Accommodations
Once it’s safe to do so, find a place where you can temporarily stay while your home is being repaired or rebuilt. This may involve staying in a hotel, renting an apartment, or residing with friends and family.
Step 2: Keep Track of Expenses
Once you start paying for expenses related to your displacement, such as hotels and meals, ask for receipts and keep them somewhere safe so you can hand them over to your insurance company when they ask.
Step 3: Contact Your Insurance Company
As soon as you possibly can, notify your insurance company of the situation and ask about next steps. They will be able to tell you exactly how to proceed with filing a claim, as well as give you directions about any forms you need to complete.
Step 4: Submit Documentation
At some point, you will need to submit documentation to your insurance company to support your claim and get reimbursed. This may include receipts, invoices, rental agreements, and any other relevant documentation that proves your expenses and their necessity.
Step 5: Wait for Approval
After you have submitted all the necessary forms and documentation, you will have to wait for your insurance company to determine the validity of your expenses and the extent of your coverage. Depending on how long this takes, you will likely want to follow up occasionally.
Step 6: Continue to Keep Records
Since the review process can take some time, continue to keep records of all additional living expenses you incur.
Step 7: Settle the Claim
If your claim is approved, you will be reimbursed by your insurance company for any eligible expenses, up to the limits of your policy.
How Much Additional Living Expenses Coverage Do You Need?
How much additional living expense coverage you need will depend on your cost of living, which is determined by factors such as your lifestyle, location, and financial circumstances. For reference though, YouSet’s standard coverage limit for additional living expenses is $30,000.
So let’s say you live in Montreal, where the average monthly cost of living for a family of three is $3,388, and you have YouSet insurance. Since your policy provides $30,000 in ALE coverage, you could potentially rely on this coverage for nearly nine months. Meanwhile, a family of three living in Toronto, where the average monthly cost of living is $4,813, could potentially rely on this coverage for just over six months.
How to Buy Insurance with Additional Living Expenses Coverage
Displacement isn’t just emotionally devastating. It can be financially devastating too if you don’t have insurance.
To prevent shouldering the full financial burden in such circumstances, it’s highly recommended that you buy insurance that includes additional living expenses coverage for your home, condo, or rental unit. Fortunately, additional living expenses coverage is included in all home, condo, and tenant insurance policies from the top insurance companies in Canada, including YouSet.
If you are looking to buy insurance with additional living expenses coverage in the near future, keep the following tips in mind during the shopping process.
- Estimate your monthly living expenses to find out how much coverage you need
- Compare quotes from multiple providers to find the best coverage at the lowest price (you can easily do this here!)
- Familiarize yourself with your additional living expenses coverage limit. It’s important to know the maximum amount you can claim to ensure it aligns with your needs.
- Find out the duration for which additional living expenses coverage will be provided. Some policies may offer coverage for a specified period, while others may have more flexible terms.
- Take note of any exclusions or limitations related to ALE coverage in your policy so you can plan accordingly to avoid unexpected out-of-pocket expenses
- Periodically review your insurance coverage to ensure it still meets your needs and make any necessary updates or adjustments
Also, keep in mind that YouSet is designed to help you find a policy for your home, condo, or rental unit that offers the best coverage all around at the lowest price. Not only is the platform free to use, but it only takes four minutes for our algorithms to compare prices from multiple insurers and present you with the best option. This means you’ll have the peace of mind of knowing you have the coverage you need, without unnecessarily overspending.