What is additional living expenses coverage, and do you need it?

When disaster strikes and your home is no longer safe to live in because of a fire or a natural disaster like a flood, knowing the ins and outs of your insurance coverage can be a lifesaver.  

Additional living expenses (ALE) insurance is an essential part of your home insurance policy that steps in to ease the financial burden as you wait for your home to be fixed or rebuilt.  

Let’s dive into what ALE insurance is and how it can help you stay afloat when you’re displaced from your home. 

What is additional living expenses insurance?

Additional living expenses (ALE) is a standard part of your home insurance, falling under the “loss of use” coverage. It helps pay for your extra living costs if you have to move out temporarily because something bad happened to your house that’s covered by your insurance, and you’ve put in a claim for it. 

Think of it like this: if you usually spend a certain amount each month on living expenses, but now you have to spend more because you’re staying somewhere else, ALE covers the extra amount. And it’s not just for homeowners; people who rent or own a condo have this in their insurance policies, too. 

Read more: 30% of Canadian homeowners unaware they must pay extra for flood and earthquake insurance 

Additional living expenses vs. loss of use: What’s the difference?  

People often mix up loss of use and additional living expenses (ALE) when talking about home insurance, but they’re a bit different.  

Loss of use is part of your home insurance policy that helps with costs if you can’t use your home. It covers things like if you lose rental income because your rental property is damaged or if the government prevents you from going into your home during a wildfire or flood to minimize the risk of injury or death. 

ALE is just one piece of the bigger loss of use coverage that comes with your home insurance policy. It’s basically the money for extra living costs, like if you need to stay at a hotel, short-term rental or at a family or friend’s place, and is designed to maintain your normal standard of living.

What does additional living expenses insurance cover? 

When you can’t live in your home because it’s being fixed or rebuilt after a disaster, ALE can help pay for the following: 

• Staying in a hotel. 
• Renting furniture. 
• Getting your clothes washed. 
• Keeping your pets at a kennel. 
• Buying new clothes. 
• Eating at restaurants. 
• Putting your stuff in storage. 

Keep in mind however that the above expenses aren’t everything that’s covered. The coverage is there to maintain your standard of living, not upgrade it, and it depends on your situation. 

You’ll also need to show receipts for these expenses to claim them on your policy, so it’s important to keep them. 

Read next: Surprising things you can make a home insurance claim for

What additional living expenses do not cover? 

Typically, additional living expenses coverage won’t cover costs like: 

• Your regular mortgage or property tax bills. 
• Any income you lose if you have to take time off work. 
• Normal bills for utilities such as electricity, gas, internet, cable TV, and your phone line. It might be a good idea to contact your service providers to put these on hold while your home is being repaired. 
• Everyday expenses, for example, your gym subscription, mobile phone contract, or public transport tickets. 

When should I file additional living expenses claims? 

Here’s a simple guide to understanding the different reasons you might need to make a claim for extra costs of living somewhere else if your home is damaged, according to Insurance Bureau Canada (IBC): 

Evacuation by official order: If the government says you must leave your area, your insurance will pay for your extra costs for a while. This only lasts for a set number of days, so check your policy to see the limit. 

Blocked access due to damage in the area: If you can’t get back into your home because other buildings around it are damaged, your insurance might cover your extra costs. You should look at your policy or ask your insurance agent to find out how much you can get. The insurance company will decide how long they’ll help you, and it can be different for each person. 

Home damage from a covered event: If your home is too damaged to live in because of something your insurance covers, like a fire or flood, they will help pay for your extra living costs. They’ll pay until your home is fixed, rebuilt, or until you reach the limit of your coverage. If you have extra insurance for specific things like sewer problems or floods, that will help too. It’s best to talk to your insurance agent to understand your coverage limits. 

Is there a limit on additional living expenses coverage? 

In your home insurance, there’s a part called “loss of use” that deals with the costs you might have if you can’t live in your house for a while and need to stay somewhere else. This part of your home insurance usually covers up to 20% of the amount your house is insured for. 

So, let’s say your house is insured for $300,000. You could get as much as $60,000 from your insurance to help pay for things like a temporary place to stay and food while your house is being repaired.  

If you feel that this amount won’t cover all your needs, it’s a good idea to talk to your insurance company about increasing this coverage. 

How long should it take for insurance to pay you back for extra living costs? 

The Insurance Bureau of Canada (IBC) says that different insurance companies take different amounts of time to pay you back. But they know you need to cover your costs. 

Make sure to save all your receipts and talk to the person handling your claim to find out when you’ll be compensated, and if you’ll be offered the money all at once or in multiple installments. Sometimes, they might even give you some money in advance. 

The whole point of additional living expenses coverage is to make sure that if something bad like a flood or fire happens, it doesn’t mess up your whole life, so reach out to your insurance company to fully understand what your insurance policy covers. Talking to your insurance company can make getting through the hard times after a disaster a bit easier.