Homeowners Insurance 'Additional Living Expenses' Coverage Can Help People Displaced By Hurricane Katrina
September 1, 2005
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."
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