A home insurance policy covers more than simply third-party liability and physical damage to property. Home, condo and tenant insurance policies can also include coverage for additional living expenses. This would help you to pay for expenses incurred when you have to move out of your home while it undergoes repairs, or even when a community evacuation is ordered in case of a natural disaster of some kind.
The main elements of additional living expenses coverage are:
- Additional living expenses would help pay for the cost of having to stay out of your home for a period of time. For example, hotel costs and food that you wouldn’t normally have to purchase if you were able to be in your own home.
- Fair rental value could pay for your loss of rental income if you had rented out a section of your home and now the loss has made it such that your tenant can not return to live in their unit while repairs are underway.
- Prohibited access would help pay for the costs involved if you must leave your home for a period of time due to something that has happened to neighboring premises, or if the government orders an evacuation of the area (such as during a natural disaster).
Additional living expenses coverage helps cover the extra costs involved in allowing you to maintain a comparable standard of living while you must be out of your dwelling. That is, anything over and above your normal expenses. It will not cover the normal expenses you would have had anyway. For example, if your temporary accommodations do not have laundry facilities thus forcing you to use a laundromat, those extra expenses could be covered.
In other words, the additional living expenses coverage helps you pay for expenses that exceed your normal expenses before the loss. Therefore, it is very important to track your expenses and keep receipts for when you make your claim.
These types of expenses can add up quickly. Consider an example:
Your home is damaged due to an internal water pipe break which is covered by your policy. The damage is extensive to your main living area, requiring the removal of the damaged materials, drying the premises, replacing the damaged floors, walls and ceilings and then rebuilding the kitchen. The renovation is scheduled to take three months and you will be required to move out of the house until the renovation can be completed. The initial stages might include living in a hotel for a week or two until you find a suitable short term rental, then moving to the rental until your house is ready to be lived in again. Your additional living expenses include hotel costs and your short term rental fees and can also include food and transportation costs incurred which exceed your normal costs. For a family, these costs can quickly add up, particularly if your damage is substantial and takes a long time to repair.