Can’t Go Back Home? What Does “Additional Living Expense” Coverage Really Cover?
A typical renters or homeowner’s insurance policy includes coverage to protect you from damage to your home as a result of a fire, windstorm or other covered losses. But if the loss is significant, and you and your family cannot stay when repairs are being made, who takes care of the bill?
Coverage D, Additional Living Expense, is sometimes disregarded when reviewing a renters or homeowners insurance quote or policy. Additional living expense coverage will pay the necessary increase in living expenses while your home is being repaired. Whether a short term hotel stay, or renting a single family home, an insurance carrier will require you to find a suitable place to maintain your family’s current standard of living. Extra expense coverage usually comes into play when normal living expenses (movers, food, restaurant, grocery, supplies, cost of storage, etc.) is necessary and the tab will be picked up by the insurance company. Payment for these expenses is continuous until the home is conditioned for living or permanent relocation has taken place, up to 12-months.
Unfortunately, most renters and home owners believe that Loss of Use and Additional Living Expense is unlimited in coverage. More often than not, few policies do this and the common limit of Coverage D is 20% of Coverage A, or Dwelling Coverage. For example, a homeowner’s policy with a $300,000 dwelling limit will set a default amount of $60,000 in Additional Living Expense coverage.
In order for an insurance carrier to pay out for additional living expenses, a loss must occur and be covered by the homeowner’s insurance policy. While just like many other policies, a renters or homeowner’s insurance policy may contain specific exclusions to this and other coverage. This makes it extremely important to review your insurance policy or quote.
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