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Bruce Sackrison

Bruce Sackrison is a Napa Valley Register columnist who will write about property and casualty insurance matters.

Your home burned down. Where are you going to live? Can you afford it?

In my last article, we explored Coverage C, Personal Property Coverage. Now it’s on to Coverage D, Additional Living Expense, which can also be referred to as Loss of Use coverage.

What’s covered?

Additional Living Expense (ALE) covers the additional living expenses and costs associated with being displaced from your home if it becomes uninhabitable after a covered disaster, up to policy limits.

In other words, if you can’t live in your home after a covered loss, this coverage kicks in to help pay the extra costs of daily living while your home is being rebuilt.

Coverage is limited by either a time span (such as 12 months), a set dollar amount (often 10 to 20 percent of the dwelling coverage limit) or both. It pays until your limits are reached or your home is repaired.

What’s not covered?

This coverage is pretty broad in scope. Lots and lots of things are reimbursed. Your whole life is upended; suddenly you are staying in a hotel, you’ve got to find a place to eat... maybe you need to take a cab to get to work in the morning. That’s what this coverage was made for.

But emergency spending can get out of control really quickly. So, some simple limitations apply:

First, don’t change your lifestyle from a reasonable Napa Cabernet to a private reserve Dom Pérignon.

Insurance companies expect you to maintain your current standard of living, but not to increase it at their expense.

If you lived in a nice home, you can’t rent a mansion while your home is being rebuilt. As much as you’d like prime rib every night, unless that’s what you ate before, don’t expect the insurance company to foot the bill. If you lived in a three-bedroom home, that’s the home you’ll need to rent.

Second, it’s an “additional expense” coverage.

Let’s say your family spent $300 a week on food at home. Now you are eating at the local café for breakfast, McDonald’s for lunch and Applebee’s every night. The bill comes to $525 a week. You would be typically reimbursed the additional cost of food, which is $225. Not the total food bill.

Third, you won’t usually be reimbursed for staying with family or friends.

Finally, the insurance company isn’t paying for a vacation.

If a tree fell on a corner of your house, but you can still live in your home while they repair the minor damage, you can’t move into a hotel and send the insurance company the bill... even if the repairs are loud. Your home must be uninhabitable due to a covered event for this coverage to kick in.

Final thoughts

This type of coverage requires a lot of “hands-on” attention if there’s a disaster.

You’ll need to keep detailed records and receipts. You’ll need to understand your policy limits. And you’ll need to be reasonable on spending.

At some point, the insurance company will expect you to move out of the hotel and into longer-term rental housing if repairs are expected to take a while.

That’s financially fair and practical. It’s a win-win for you to settle into a place of your own. Working closely with your claims adjuster can make the entire process go more smoothly.

Finally, talk to your local agent today if you aren’t sure that you have enough coverage for Additional Living Expense.

Bruce Sackrison is an insurance property and casualty broker affiliated with Professional Insurance Associates. He is at 707-931-0186 or bruces@sackifs.com.

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