What are additional living expenses?

An overview of additional living expenses

Additional living expenses (ALE) is part of most tenant and homeowner insurance policies in Canada. ALE, also sometimes called loss of use coverage or simply Coverage D, insures policyholders and their household family members for the increase in living expenses if they’re forced to leave their home following a loss that their policy covers.

The key word here is additional; you won’t be reimbursed for all your living expenses — only the ones that are over and above your regular, day-to-day living expenses.

Most policies define living expenses as accommodation, food, and residential utilities. You can claim the increase or additional costs on these items if you have to move out of your house due to an insured peril.

What’s covered under ALE?

There are two situations in which a policy will pay for these increased living expenses: direct damage, and evacuation orders.

Direct damage

Direct damage means your home is unlivable because of direct physical damage due to an insured peril.

In other words, your home has sustained actual damage, whether that’s from fire, smoke, water, an earthquake, or some other event. These causes of loss are perils.

For ALE coverage to kick in, the damage must be severe enough that you can’t stay in the home, and it must result from a peril that your policy covers. Home insurance always includes fire coverage, so fire damage would allow for ALE coverage. Termite damage, on the other hand, would not permit someone to use ALE coverage, because home insurance doesn’t cover damage caused by pests or vermin.

You will be able to claim your ALE for the reasonable period of time that it takes to repair the damages and make your home livable again, or until you reach your coverage limit (whichever happens first). You may hear this called the indemnity period.

Evacuation by civil authority order

You can also use ALE coverage if you are not allowed to stay in your home because a civil authority has ordered you to evacuate. This is also usually limited to perils your policy covers.

So, for example, a wildfire is nearing your neighbourhood and the civil authority orders everyone to leave. Under this circumstance, ALE would cover your extra living expenses while evacuated.

Or, alternatively, say you live in a condo complex and one of your neighbouring units has a fire. While your unit is undamaged, the civil authority won’t let anyone live in the building until adequate repairs are complete and the building is made safe.

Some policies limit the civil authority ALE to a set dollar amount or a time period. It’s important that you check your own policy to determine what your specific limit is for civil authority evacuation ALE.

It is important to know that when it comes to being evacuated by a civil authority (a mass evacuation), a mere alert does not qualify. Civil authorities often put areas on evacuation notice or alert, and you may decide to leave voluntarily. But the civil authority must issue an actual evacuation order for ALE to apply. Once the civil authority lifts the order and gives the all clear to return home, the mass evacuation ALE claim will cease, regardless of how long it takes you to return home.

You will be asked to document your claim, so keep all your receipts. Your adjuster will ask for these receipts to calculate your reimbursement, and clarify what’s claimable and what’s not. The eventual settlement will be subject to your policy deductible.

Generally speaking, you can only claim the increase in food, accommodations and residential utilities. Here’s more about how each of these work:

Food

Only the increase in food expenses is claimable. People have to eat whether they are living in or out of their home, but sometimes living out is more expensive. For example, if your hotel room doesn’t have a kitchen, you’ll be forced to visit restaurants or order takeout for the duration.

To calculate this, your insurance provider would determine your average food cost and deduct that amount from the expenditure for food incurred over the course of the time covered by ALE.

You cannot claim for alcohol, nor can you claim meals for family members not living in your household.

Accommodation

The options for accommodation under ALE are varied.

Typically, people either stay with family and friends, in a hotel, or arrange for a long-term furnished rental if the claim is going to be several months. You can also stay in your RV, an Airbnb, or anywhere else that you’d be comfortable. Speak to your adjuster about any ideas you have that would work for you.

When staying with family or friends, you’ll receive a daily billeting (room and board) rate for adults and children for any part of a month. When the stay is a month or longer in duration, you may receive a monthly rate. Billeting rates aren’t as high as the reimbursement you’d receive for a hotel, because family and friends don’t have the same overhead costs (nor profit motives) as a hotel. Room and board is payable to the host.

If you are staying at a hotel, you receive the room rate, applicable taxes, and parking fees. However, in-room entertainment (movies and games), mini-bars, and long-distance phone charges aren’t covered.

If you’re a tenant, you may receive a rebate on your rent for the period you are unable to stay in your home. This rebate will be deducted from any incurred accommodation costs.

In cases where the displacement lasts several months, many people arrange a long-term furnished rental. Homeowners will be reimbursed the full cost of the monthly rental (or your home insurance provider will pay the rental company directly.) Tenants, however, are encouraged to seek new permanent accommodations; they can use ALE to pay for moving costs.

Residential utilities

Sometimes it’s necessary to suspend your cable, internet, power, and other utility costs or move them to your temporary location while you’re away, and then back home again after. If there are costs associated with this, and you can claim these costs under ALE. If in doubt about what qualifies as a residential utility, ask your adjuster.

Information for Square One customers

We’ve covered how ALE works in general. Now, here are a few specific details for those who have home insurance from Square One. ALE is standard on all policies sold by Square One, except those insuring secondary or vacation homes (for these, it’s optional).

It works as we’ve described so far on this page: ALE will cover extra living expenses that you incur while you’re displaced from your home due to an event that’s covered by your policy. That includes being away while repairs are made as part of a covered claim, of course.

ALE is also available if you’re ordered to evacuate due to a sudden and accidental event, even if your home isn’t damaged. Square One customers can also use their ALE coverage if they’re ordered to leave their home because of damage to a neighbouring property, as long as that damage would be covered if it happened to their own property. In either case, the order must come from a civil authority.

ALE coverage limits

When you buy a policy from Square One, you can choose your limit of coverage for ALE. Your coverage will continue either until you reach that limit, or you’re able to move back into your home. This limit applies if your home has become uninhabitable due to an insured loss.

Separate limits apply to evacuation order claims: $10,000 for homeowners or equity co-ops, and $5,000 for tenants or housing co-ops. That includes evacuations due to sudden and accidental events (like wildfires or other natural disasters), or if ordered to leave due to damage to a neighbouring property.

When choosing your ALE limit, we recommend planning for at least 12 months of additional expenses, and possibly as many as 24 months — home repairs can take longer than you think. Remember, the coverage is for additional expenses, not total expenses. So, compare your typical at-home expenses to an estimation of what your expenses would be if you had to temporarily move out (accommodation, food, transportation, pet boarding, and so on).

For example, say your average grocery bill is $500 per month. If you’re away from home, you might spend way more on food (say $1,000), as you may need to order food or visit restaurants much of the time. In this case, your additional grocery expense would be $500.

Similarly, if you rent your home for $1,500/month but you’re forced to stay in a hotel for $4,500/month, your additional accommodation expense would be $3,000/month.

Staying with family or friends (billeting)

While ALE covers hotel or short-term rental accommodations, you also have the option of staying with family or friends. After all, having to move out of your home, especially after a disaster, can be very traumatic. Staying with someone you know also helps make the most of your coverage limit, as it won’t be as expensive as living in a hotel.

If you choose to stay with family or friends, we’ll pay a daily billeting rate for room and board. The amount depends on the members of your household (your usual household, not including the people you’re staying with):

• $30/day for one adult
• $10/day for each additional adult or youth aged 12+
• $5/day for each child (age 12 and under)

The billeting rate is intended to cover lodging costs and meals. We’ll provide payment to your hosts, to help them offset the added costs of extra people in the house.

Keep in mind that you can also split your time away from home between billeting or staying in commercial accommodation. For example, you might wish to stay with family for a week or two while you sort things out, then move into a short-term rental if repairs will take a while. In this case, we’ll pay your host for the time you spend with them, and ask you to submit receipts for the rest of the time.

If you need to report a claim, your adjuster will help you make decisions about how to use your ALE coverage.

Commonly asked questions

Does ALE cover expenses while you’re evacuated?

Most comprehensive policies include a special provision for mass evacuation. Your policy will specify the criteria that must be met to qualify for additional living expenses during a mass evacuation.

For example, it will likely require that a civil authority impose an evacuation order upon you as a result of a peril covered by your policy. Mass evacuation coverage is only available to you while an evacuation order is in effect; coverage will cease once the civil authority permits you to return home.

If you are subject to an evacuation order, contact your insurance provider as soon as possible to confirm what coverage your policy provides. Most policies limit the amount of money available for additional living expenses during a mass evacuation or specify a maximum number of days that will be covered. Confirming this information early will help you plan in order to avoid running out of coverage.

What does “insured peril” mean in relation to ALE?

Most home insurance policies today provide comprehensive protection which will cover you for many types of loss, including fire, smoke, windstorm, water, theft, and much more. Things that cause loss are known as perils in insurance parlance. If your home were damaged by a fire, or you were ordered to evacuate due to a fire, your ALE coverage would almost certainly be available.

Comprehensive policies cover every peril, except those specifically listed as exclusions. Certain exclusions are common to most insurance providers: for example, almost all Canadian home insurance policies exclude losses caused by landslide, coastal flood, insects, or vermin. So, if your home were destroyed by a tsunami (for example), your policy likely wouldn’t provide ALE coverage. Government emergency funds are usually made available to help with uninsurable disaster costs, however.

When a covered peril causes enough damage to your home to render it temporarily uninhabitable, your insurance will reimburse your additional living expenses, up to the limit on your policy.

What types of expenses are considered additional?

While your home is being repaired, you will continue to be responsible for your ordinary, ongoing expenses. These might include mortgage payments, insurance premiums, transportation costs, utilities like natural gas, internet and cable TV, and groceries.

Additional expenses are increased costs that occur as a direct result of the loss. These might include the cost of your hotel stay or temporary home rental, food, transportations, and boarding expenses at a kennel for your pet.

Keep in mind that insurance policies will only cover additional expenses that are reasonable and necessary, and that result from your loss. If in doubt, ask your insurance provider what expenses your policy will cover. Reasonable and necessary emergency expenses usually include emergency toiletries and medications, and one or two emergency changes of clothing for you and your children.

Does ALE cover rental suites?

If your home had a basement suite which you rented out, and the loss was substantial enough to render the suite uninhabitable, you may not receive your regular rent until your tenants can move back in after the repairs are complete. As mentioned above, you’re still responsible for paying your mortgage, but you may temporarily lose your source of important rental income.

To protect you against lost rental income, you should consider purchasing rental income insurance. This is an inexpensive optional coverage available from most insurance providers. Like all insurance, it needs to be purchased before a loss occurs. Talk to your insurance provider to find out if your policy already includes this coverage.

Do you have enough ALE coverage?

Most traditional policies automatically provide additional living expense insurance in an amount equal to a percentage of the building coverage for house owners, or a percentage of personal property coverage for condo owners and renters. The limit has nothing to do with what your additional living expense is likely to be.

If you own a second home that you could move into or have relatives nearby that you could stay with, you may not have to worry about moving into a hotel. So, why pay extra for protection you don’t need? With Square One home insurance, you have the option of selecting a limit of coverage that’s tailored to your specific needs in the event of a loss.

Does ALE apply to home businesses?

If you were running a business from your home, you might need to rent a studio or office space temporarily. If you are unable to continue your business as a result of the loss, what about your lost income?

As these are business expenses, they’re not covered under ALE. Be sure to talk to your insurance agent about obtaining coverage. Some home businesses can be covered by your home insurance policy, while others may require you to purchase a specialized commercial insurance policy. Either way, your insurance provider can provide advice on the right kind of coverage you need to protect your business property and income in the event of a loss.

Suffering a major loss will always be stressful and traumatic. But having the right home insurance can certainly take away some of the worry.

Want to learn more? Visit our Home Insurance Basics resource centre for dozens of helpful articles to guide you through the ins and outs of home insurance. Or, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.