What Are Additional Living Expenses?
An unprecedented beginning to the wildfire season across the country has forced tens of thousands of residents in seven provinces and one territory out of their homes. Many don’t know when - or if - they’ll have a home to go back to.
Over the month of May alone, 2.7 million hectares of forest went up in flames in B.C., Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia, New Brunswick and the Northwest Territories.
Evacuees are living in shelters, hotels and with friends. Expenses can add up.
That’s why most personal property insurance policies (homeowner, condominium unit owner and tenant) cover the cost of alternate accommodations and living expenses for people whose home has become unliveable after an insured loss. There is also limited coverage for mass evacuation under certain circumstances.
This coverage is called additional living expenses or ALE in an insurance policy. This usually occurs when your home or apartment is uninhabitable after some form of accident and your home needs repair. The coverage lasts until your home is repaired or until the policy limit has been reached.
When is ALE triggered?
Each situation is unique, but there are several categories of claims that fall under ALE. The Insurance Bureau of Canada (IBC) advises when an event like wildfire activates an insurance policy, it is crucial that policyholders discuss their specific circumstances with their insurer so they are aware of when this comes into play.
IBC lists the categories of ALE as:
Prohibited access because a civil authority has ordered a mass evacuation: This coverage starts on the date of evacuation and typically expires after 14 days. You should keep all receipts for meals and hotels, for example. Policyholders are advised to check their own policies for limits. When an evacuation order is lifted, prohibited access coverage ends. If your home is not damaged and the governing authority has given an all clear to return but you choose not to, you will not be eligible for ALE. If there are extenuating circumstances, you should contact your insurer.
Prohibited access as a direct result of damage to neighbouring premises: This covers a policyholder whose home may not have been damaged but who cannot return because of damage to homes nearby. Policyholders should check their policies or ask their insurance representative to confirm their limit. Insurers review the duration of coverage on a case-by-case basis.
Damage to your home by an insured peril, for example fire, flood or related damage: This covers a policyholder whose home is unlivable because of damage by an insured peril. It typically covers additional living expenses for a reasonable amount of time needed to repair or rebuild the home or until the policy limit is reached.
What is a reasonable length of time to wait for insurance companies to reimburse us for living expenses? Reimbursement periods vary; however, insurance companies understand that homeowners need to pay their expenses. Keep all your receipts and speak with your adjuster about what to expect regarding the timing and frequency of reimbursement.
What does ALE cover? ALE covers the increased cost of living as a result of being displaced. For example, if your temporary accommodations didn’t have laundry facilities and you had to use a laundromat, those expenses would qualify.
What are coverage limits?
In many cases, total ALE coverage limits are 20 to 30 per cent of the replacement cost coverage on your home policy. There is a ceiling on coverage represented by a percentage of your home’s value as listed in your policy. Insurance companies will allow an increase in coverage limits for an additional premium.
These expenses would not include such things as:
- Mortgage payments or property taxes
- Wages lost due to time taken off
- Utility bills for the property owner.
- If you are cooking meals at your temporary location, food would not be covered. If cooking is unavailable, meals and restaurant bills would be covered.
- Usual expenses such as cellphone plans and transit passes
Meanwhile, IBC’s Gloria Haydock, the Atlantic manager of consumer and industry relations, recently assured policyholders in fire-ravaged Nova Scotia their policies will cover damage from wildfires.
"I want to make it very clear, all standard homeowners' and tenants' insurance policies cover damage by fire, so that's really important to know," Haydock told CBC Radio's Maritime Noon.
IBC officials urged property owners to file their claim as soon as they can since the process will move faster if it is submitted earlier.
“When it comes to that time when you have headspace to think about next steps, including insurance, the industry is here and ready to respond and know just how devastating this particular event has been and continues to be," Amanda Dean, the Atlantic vice-president for the Insurance Bureau, told CBC.
If you’ve been evacuated because of wildfires, it’s important to contact your insurer for assistance. You can also call IBC for advice at 1-844-227-5422.
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Your wildfire evacuation checklist