Experiencing the total loss of your home in a disaster, such as a wildfire, is devastating. As you begin to rebuild your life, it’s natural to turn to your homeowners’ insurance policy for support. One key component of this policy is Additional Living Expense (ALE) coverage, designed to help you manage the increased cost of living after being displaced from your home.

However, it’s crucial to understand both what ALE is designed to do—and what it doesn’t do.

What Is ALE?

ALE helps cover extra costs you incur to maintain your normal standard of living while your home is being repaired or rebuilt. The emphasis is on "additional." ALE does not cover your total living expenses, nor does it provide unlimited coverage for any cost you incur. Instead, it covers the difference between what you were spending before the loss and what you’re spending now due to your displacement.

Example Scenario:

• Mortgage: $3,000/month.
• Temporary rental home: $5,000/month.

Under ALE, your insurance company would pay the difference of $2,000 per month (the additional cost of your temporary housing). You are still responsible for your original $3,000 mortgage.

The Math Behind ALE

Here’s a breakdown of the numbers over one year:

• Mortgage: $3,000/month × 12 months = $36,000/year.
• Temporary rent: $5,000/month × 12 months = $60,000/year.
• Total housing costs: $96,000/year.

In this scenario:

• The insurance company would pay $24,000 (the difference between your regular housing costs and the elevated temporary housing costs).
• You would remain responsible for covering $72,000 out of pocket ($36,000 for your mortgage and $36,000 for the remainder of your temporary housing costs).

Common Misunderstandings About ALE

1. It doesn’t cover everything.
   ALE is designed to offset costs, not eliminate them entirely.

2. Expenses must be reasonable and necessary.
   Insurers may challenge excessive costs, such as luxury accommodations or unnecessary upgrades.

3. It only applies to “additional” costs.
   For instance, if your regular grocery budget is $800/month and now you’re spending $1,200 due to eating out more often, ALE would likely cover the $400 difference—not the full $1,200.

How to Navigate ALE

To make the most of your ALE coverage and avoid surprises, consider these tips:

• Request a breakdown of covered expenses.
  Your insurance company must provide a list of typical expenses covered under ALE upon request.

• Track all receipts and expenses.
  Keep detailed records to demonstrate how your costs have increased.

• Communicate with your insurer.
  If you’re unsure whether an expense will be reimbursed, consult your adjuster before incurring the cost.

Moving Forward

Understanding ALE coverage is critical for managing your expectations and finances during an already challenging time. While ALE won’t cover every cost, it is an invaluable resource to help you stay afloat.

If you have questions about your policy or need assistance navigating the claims process, reach out to one of our experienced advisors for guidance.

Remember: ALE is here to help—but knowing how it works can make all the difference.

If your liquid assets are over $3 million, we recommend a complimentary Private Client coverage review with UWIB Risk. This review is designed to ensure you’re fully protected, and it could offer valuable insights into your coverage needs.
Take advantage of this cost-free opportunity to safeguard your assets. Schedule your Private Client Review today!