Homeowners Insurance 'Additional Living Expenses' Coverage Can Help People Displaced By Hurricane Katrina
Many residents forced from their homes by Hurricane Katrina have insurance coverage under their homeowners insurance policies to pay for food and housing and other essentials of daily life, termed additional living expense (ALE), according to the American Insurance Association.
"Hurricane Katrina evacuees may either be in hotels, in evacuation shelters, or staying with friends or relatives, and may be uncertain as to whether their home is uninhabitable," said Janet Bachman, AIA vice president, claims administration. "These policyholders should call their insurance company to inform them that they have been required to leave their residence and the area due to Hurricane Katrina, and to get advice on how their ALE coverage can assist with additional living expenses if either they were required to evacuate or if their home is uninhabitable due to windstorm or flood damage."
Homeowners insurance policies specify the amount of ALE coverage available. Generally, ALE pays for the difference between what it cost the family before the loss for housing and food and what it costs post-loss. As an example, before the loss a homeowner may have had a mortgage payment and utility bills (phone, electricity, etc.), and average monthly costs for groceries could be $500.
Post-loss, the homeowner/family is staying in a motel or rents an apartment and eats many meals in restaurants. The insurer will pay for the difference between the cost of all these items pre-loss (minus non-continuing expenses such as utilities) and the cost of these things post-loss. Policyholders should keep all receipts for lodging and meals to make the claims process easier. Some insurers will provide ALE funds immediately upon being notified of a loss; others may reimburse policyholders at a later date. It is important for policyholders to contact their insurer or insurance agent for more information about this coverage.
It is important to note that ALE coverage is available only when the insured property is uninhabitable because of a loss covered under the homeowners policy. Federal flood insurance policies do not include ALE coverage, so this assistance will not be available when damage to a home occurred from flooding or storm surge.
The amount of coverage for ALE differs from insurance company to company and depends on the specific homeowners policy. Many policies provide coverage equal to about 20 percent of the amount of insurance on the home. For example, if the dwelling coverage is $500,000, ALE coverage would be $100,000.
"ALE coverage provides an important lifeline to policyholders whose lives are devastated by disasters like Hurricane Katrina," continued Bachman. "In many cases ALE coverage can help families leave shelters and move to better housing and hopefully improve the dire situation in even the slightest way."
