Advantages and Disadvantages of Additional Living Expense Insurance

Additional Living Expenses are those expenses which include the cost of temporary rental home, hotel room, restaurant means and any other expenses incurred while the home is under repair. Such expenses can be paid by insurance company by way of additional living expenses. The additional living expenses meant to cover the cost of living at someplace but not at home.  The insurer will pay necessary increases in living expenses including moving costs so that the personnel able to maintain normal standard of living. To get such additional living expenses, the homeowner should take an insurance policy so that insurer will pay the expenses.

The insurer only pays the additional living expenses only the insurance is covered under the perils mentioned.  Normally perils like fire, lighting, theft, explosion, impact of aircraft etc will be covered. It means if the homeowner affected by such perils eligible for payment additional living expenses at temporary stay.  The earthquake insurance involves extra cost. However, the amount of living expenses is limited to standard of living. Besides the payment is limited to reasonable time that require repair or rebuilt of home. It means, the insurance company will pay up to particular period of time, though the house is rebuilt or not.

When there is loss of property, the insured homeowner will be benefited by getting immediate and critical needs for food and shelter under the clause of ALE i.e. Additional Living Expenses.  It means if a home owner suffers from damage of the property, the owner eligible to receive temporarily living charges in hotel and other food expenses.  Not only that, the homeowner has advantages of availing expenses like public transportation, additional emergency clothing, counseling service etc. Therefore the homeowners can take the advantage out of insurance policy under the clause of Additional Living Expenses. The advantages include loss of rent, security and utility deposits, expenses of rending furniture and electronics etc.

But there is disadvantage about unlimited payment. Hence, the homeowners aware that some insurance companies will provide unlimited coverage while other insurance companies will pay on percentage of coverage basis. Besides, the policy will be available upto 12 months. No compensation is paid in case there is no damage and hence the entire policy will no longer available. Another disadvantage is that the insurance companies will not pay any mortgage amount as the coverage is under the clause of Additional Living Expense but not under the clause of “Loss of use”