Oklahoma Tornadoes: Spring 2013, — May 28, 2013 13:02 — 79 Comments

Lessons from Moore: Additional Living Expenses

Recovering from a disaster like the Moore, Oklahoma, tornado can be a bewildering process, but we’re here to help you understand the ins and outs of your insurance coverage and the claims filing process. In this series of posts we’ll take you through what you need to know in order to make the recovery from the disaster as smooth as possible.

Lesson #1: Temporary Housing—You’re Covered

With insurance, you have money for temporary housing if your home is destroyed

Your property insurance pays for housing, food and other essentials if you are forced from your home by damage from a natural disaster. This coverage is called additional living expense (ALE). Most renters insurance policies also provide this coverage.

ALE pays for the difference between costs for housing and food before the tornado and after the tornado. For example, if you had a mortgage and typically spend $500 a month on groceries, but now have to rent a hotel room and eat most meals in restaurants, then ALE covers this additional cost. It is important to know that this coverage only applies if a home is uninhabitable due to a loss covered under the policy.

Temporary Rental Must Be Similar

For temporary accommodations to be covered by ALE, they must be similar to the insured property. If the tornado destroyed a three-bedroom home, the insurer will pay for the rental of a similarly sized structure, not a five-bedroom house.

How much coverage ALE provides differs, depending on the insurer. Most policies provide about 20 percent of the amount of the insurance on the home. That means that if the home was insured for $300,000, the limit of the ALE coverage would be $60,000. Your insurance professional can also tell you how long this coverage is available—it may range from six months up to a full year.

Insurers have been handing out advances to pay for ALE, and some Moore residents were not aware it was part of their policy. In fact, a homeowner in Moore called into a radio talk show over the weekend, wondering about the $5,000 check his insurer had given him for additional living expenses. He thought that amount might be deducted from the insurance payment he gets for the destroyed home. It won’t: ALE is separate coverage. The caller was relieved to learn this!

Insurance Tip: Keep all your receipts for lodging and meals. Most insurers provide some ALE money as an advance, and then will reimburse policyholders from the receipts they turn in at a later date. Always call your insurance professional if you have any questions on how the coverage works.

79 Comments

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