Renters Insurance and Additional Living Expense Coverage
Did you know that most renters policies will cover some of your expenses if a disaster forces you to relocate temporarily? Here's everything you need to know about this “loss of use” portion of your plan.
A lot of people buy renters insurance so it'll come to their aid if a fire or other disaster damages or destroys their belongings. Many others buy it so it'll protect them if someone breaks into their apartment, condo, or house and steals those same possessions.
Those reasons are as good as any to invest in this type of insurance policy, but they're far from the only good reasons to do so.
Another reason that gets far less attention than it should: most renters policies include something called additional living expense, or “loss of use,” coverage.
But what is additional living expense coverage? And why should you view it as yet another positive component of renters insurance? Keep reading for answers to those questions and many others.
What is Additional Living Expense Coverage?
This kind of coverage helps people pay for the additional living expenses that pile up when some sort of disaster—or “covered loss”—temporarily forces them out of their rental homes.
For example, a windstorm may damage the house you’re renting and make it uninhabitable while the owner makes repairs. Or a fire might destroy your apartment and make it unlivable for a few months or even a year.
If you find yourself in a situation like the one described above and you have renters insurance, this portion of your policy will help you pay for hotels, meals, laundry, transportation costs, and more, until you’re back in your rental unit. (Or until you’ve permanently relocated.)
The thing to remember here is that it covers “additional” living expenses. In other words, it won’t pay every bill that’s sent your way while you’re unable to live in your apartment, condo, or home. Instead, it chips in to help you with costs that go above and beyond what you’d normally spend on housing, food, and the like. Specifically, it reimburses you the difference between your additional living expenses and your “usual” or typical ones.
Why Is Additional Living Expense Coverage Important?
For starters, the additional living expense or loss-of-use component of renters insurance is important because it provides peace of mind. How so? Well, it keeps you from worrying about becoming homeless if a disaster or some other crisis forces you to move out of your rental home for a while. It also keeps you from worrying about intruding on family or friends should you need to temporarily relocate.
It’s also important because it keeps you from spending a lot more money than you’re used to spending if a disaster or some other crisis forces you from your rental.
If that doesn’t sound like a big deal, calculate how much it would cost you to stay in a hotel for a month or two and then compare that amount to what you spend on rent. Or calculate how much you currently spend on groceries and then compare that amount to what you might spend eating out for a couple of weeks or more.
That exercise should open your eyes to just how expensive it can be to relocate—even for a short period of time—because of a fire or storm or some other “covered peril.”
How Does Additional Living Expense Coverage Work?
This portion of a renters insurance policy usually works by reimbursing you the difference between your normal living expenses and the “extra” ones you rack up when some kind of damage or destruction forces you to move out of your rental home for a while.
For example, let’s say your rent is $1,000 a month and a kitchen fire causes you to have to relocate while the property owner repairs the damage. After doing some digging, you find a nearby hotel that’ll cost you $1,200 a month.
Assuming you don’t have to pay your rent until you move back into your rental house, and assuming your insurance company gives you the go-ahead to find temporary lodging, your policy will pay you $200 a month for as long as your apartment, condo, or home are uninhabitable. (It won’t cover your $1,000-a-month rent because you’re not paying it at the moment.)
Most renters insurance policies treat food and laundry and transportation costs in a similar manner. In other words, if you normally spend $200 a week on groceries and a covered peril forces you to move from your apartment to a hotel room without a kitchen, your plan will reimburse you for restaurant bills that take you over your usual $200-a-week meal budget.
Whatever you do, keep in mind that the additional living expense (or ALE) portion of a renters insurance plan aims to maintain your current standard of living. If you go way above that and stay in a ritzy hotel or dine at fancy restaurants, your insurer may review your claim and reduce your reimbursement.
Which Perils or Disasters Does Renters Insurance Cover in This Kind of Situation? Which Ones Doesn’t It Cover?
The first step you should take to see which events count as covered perils in this regard: read through your renters insurance policy.
If that doesn’t clear things up, your next step should be to contact the insurance company that sold you your renters policy. Someone there can tell you which situations or events the ALE component of your plan covers and doesn’t cover.
Typically, though, the additional living expense portion of a renters insurance plan kicks in when one or more of the following damage or destroy the policyholder’s apartment, condo, or house:
- an explosion
- falling objects
- fire or smoke
- a windstorm
- water damage from a burst pipe
- weight of snow, ice or sleet
Which disasters or perils doesn’t renters insurance cover in this way? Keep reading to learn more.
Also, if you’d like to learn more about what this type of insurance does and doesn’t cover, read our article about renters insurance basics. And see our article about what renters insurance doesn’t cover, too.
Does Additional Living Expense Coverage Exclude Any Particular Disasters, Situations, or Losses? If So, Which Ones Does It Usually Exclude and Why?
Renters insurance policies rarely, if ever, cover damage caused by flooding or earthquakes. Given that, it shouldn’t be surprising to hear that most renters policies won’t reimburse additional living expenses that result from those disasters.
As mentioned earlier, most renters insurance policies also won’t reimburse additional living expenses that are tied to mandatory evacuations. One exception: mandatory evacuations associated with approaching or spreading fires.
Don’t take this is gospel, though, and don’t assume your renters insurance won’t cover a catastrophe or other event that’s made your home unlivable.
If something happens to your house, condo, or apartment that makes it uninhabitable, contact your insurer. Explain the situation and see if the ALE portion of your renters policy can help in any way.
Which Expenses Will the Loss-of-Use Portion of My Renters Insurance Policy Cover?
The most obvious examples are lodging—for hotels or other temporary accommodations—and food costs.
That’s not all this type of coverage tends to help people with renters insurance pay for after a peril forces them from their homes, however. It also usually covers:
- laundry fees
- transportation costs
- utility expenses that are higher than what you typically paid before you relocated
- storage of some of your possessions while your rental is being repaired
- pet boarding
Your plan’s ALE or loss-of-use coverage may help you pay all of these costs, or it may only help you pay some of them. Before you start spending, read through your policy documentation or, better yet, contact your insurer so you know which bills it will and won’t cover.
Also, before you move any of your belongings into storage, check out our article about insurance and self-storage units.
Which Expenses Won’t the Loss-of-Use Portion of My Renters Insurance Policy Cover?
The additional living expense component of a renters policy usually covers a lot of costs, but it doesn’t cover everything.
A case in point: it won’t help you pay for damaged or destroyed possessions. (Thankfully, they’re covered by other portions of your renters insurance plan. On a related note, if you’ve yet to catalog all of your “stuff,” you should do so as soon as possible. Read our article about how to create an inventory of your possessions for renters insurance claims for more information.)
Additional living expense coverage also won’t pay for things like entertainment. It only covers expenses you wouldn’t have had to deal with if disaster hadn’t forced you from your rental home.
Heads up: this type of coverage may not pay for alcohol, either. If that’s a concern, ask your insurer for clarification before hitting the liquor store.
Do All Renters Insurance Policies Include Additional Living Expense Coverage? Or Does Renters Insurance Always Offer Additional Living Expense Coverage?
It’s hard to use a word like “always” when it comes to insurance coverage. After all, there are so many insurance companies and insurance policies that there’s bound to be an exception to every rule.
That said, it should be safe to say that most, if not all, renters insurance plans you come across will include some amount of additional living expense or loss of use coverage.
Of course, the extent of that coverage, or the limits placed on it, are sure to differ from insurer to insurer and plan to plan. So don’t assume how one renters policy deals with additional living expenses is how all others deal with them. You’ll still want to shop around and compare quotes before you settle on a particular offering.
When Doesn't Renters Insurance Include Additional Living Expense Coverage? Or Why Does It Sometimes Not Offer This Kind of Coverage?
The vast majority of renters policies provide ALE or loss-of-use coverage, so it’s unlikely you’ll find many—or even any—that don’t provide it while you shop for this kind of insurance product.
If you come across a plan that doesn’t include it, take it as a sign that you should keep looking. After you find a handful of renters insurance policies that do offer this type of coverage, compare them to each other and then go with the one that best fits your needs.
When Does Additional Living Expense Coverage Kick In? Or What Prompts It to Pay Out?
This part of your renters insurance plan comes into play when a covered peril or event causes you to have to move out of your rental unit temporarily.
As mentioned earlier, the most common perils that causes this coverage to kick in are explosions, fires, windstorms, and water damage from burst pipes.
If you have renters insurance and something happens that makes your apartment, condo, or house unlivable, call your insurer and ask what you need to do to take advantage of the additional living expense portion of your policy.
When Should I File an Additional Living Expense Claim? When Shouldn’t I File an Additional Living Expense Claim?
The best way to set yourself up for success in this area is to only file an ALE claim after a covered peril or event makes your rental unit unlivable.
In other words, don’t file this kind of claim if you and your family are annoyed by the sounds repairmen are making in your basement or on your roof and want some peace and quiet. Your insurance company probably won’t consider that a covered peril.
If you don’t know which perils or events your insurer covers in this kind of situation, pull out your policy and read through it. And if that doesn’t make things clear, email or call the insurance company and ask for help.
No matter what, don’t just assume your apartment, condo, or house is uninhabitable and head to the nearest hotel. Tell the insurance company what’s going on and get their approval before you move out.
What Might Cause an Insurance Company to Refuse to Reimburse Me for Additional Living Expenses?
Here are a few reasons an insurer may refuse to reimburse you for additional living expenses:
- It determines your rental unit isn’t uninhabitable.
- Flooding (not caused by a burst pipe) damages or destroys your apartment, condo, or house.
- An earthquake damages or destroys your home.
- A mandatory evacuation forces you to leave your rental.
How can flood or earthquake damage keep your insurance company from reimbursing you for additional living expenses? Standard renters insurance policies rarely cover either of those disasters. For that kind of protection, you have to buy extra or separate coverage.
That said, there are times when this part of your renters policy will kick in even though, say, flooding or mandatory evacuations prompt you to relocate for a short while.
One such instance is if the wind of a hurricane damages or destroys your rental home and makes it unlivable. Another example is if you're forced from your rental home because of an evacuation tied to an approaching fire. If a flood prompts the evacuation, though, you’re out of luck.
Speaking of flooding, if you live in an area where it’s a possibility, read our article about flood insurance for renters.
Does This Coverage Differ from Renters Insurance Policy to Renters Insurance Policy? Or Is It Usually the Same No Matter Where You Get It?
On the one hand, renters insurance is a fairly straightforward and simple product. Unlike most other types of insurance, it focuses on just a few forms of coverage. As such, the majority of renters policies you come across while shopping around are likely to offer a similar amount of additional living expense or ALE coverage.
On the other hand, a lot of insurance companies sell renters policies. And how one insurer calculates your premium can be vastly different from how another insurer calculates your premium. Given that, you shouldn’t expect every renters insurance plan you encounter to deal with ALE coverage in the same way.
So, you’ll still want to do your homework and compare as many renters insurance policies as possible before you settle on one.
Do Renters Insurance Plans Usually Limit Additional Living Expense Coverage in Any Particular Ways? If So, How?
Yes, they do. One example is that most renters policies limit how long they’ll provide additional living expense coverage. Another example is that most of these policies limit how much of that coverage they’ll provide.
How long can you expect your plan to reimburse your ALE or loss-of-use costs? Twelve months is a common cap, although 24 months is pretty typical, too.
As for how much money you can expect to receive after a disaster forces you to leave your apartment, condo, or rental house, that’s harder to pinpoint. What can be said with some confidence is that insurance companies usually base this maximum dollar amount on a percentage of another coverage limit associated with your policy.
Because these limits can vary widely from one renters policy to another, contact your insurer if you’re at all unclear as to how long you’ll benefit from your plan’s loss-of-use coverage or how much money it’ll pay out while you wait to return to your rental home
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