Does Additional Living Expense Coverage = Lifestyle Maintenance?

Christine Barlow brings up some interesting points regarding the Homeowners policy's coverage for additional living expenses. In her interpretation, the policy should pay for an insured who lived like a king before the loss to live like one afterward:

As the FC&S editor who answers homeowners’ insurance questions, I know that one of the most common concerns for claims professionals is additional living expenses (ALE).

No matter how many questions I answer on the subject, there always seems to be another twist or turn in the issue. What is it that makes the ALE coverage so complicated?

For starters, it seems that the broadness of the coverage itself is a sticking point. The standard homeowner’s policy provides coverage for an increase in living expenses incurred by the insured so they can maintain their normal standard of living. That standard of living is the key; how the insured lived before the loss is what needs to be replicated after the loss. So any animals kept on the property get boarded, and if the insured has a swimming pool or hot tub, alternative living arrangements with similar items are required.

Another common issue is food. Some adjusters have balked at buying beer, wine, snacks, and such on the basis that these are not necessary or healthful foods. No matter, if this is what the insured typically eats, this is what the insured gets. If the insured is a gourmet cook and makes gourmet food every night, then once displaced the insured is entitled to gourmet food, even if it involves expensive, five-star restaurants.

The best way to look at additional living expenses is to look at how the insured lived before the loss, and duplicate it as much as possible after the loss. Indoor pets get to stay indoors, and the insured can live on cake and cognac as long as this is how the insured lived before the loss.

via www.propertycasualty360.com

I've never received a question from an IIABNY member on this. I want to echo the question she asked at the end of her piece -- what has been your experience with these claims? What are adjusters' tendencies when they settle them?

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[anylvoe]

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[George]

Hi,

Thanks for all this very useful information.
In the Colorado fire the other month, we lost our house (total loss). Our policy states something like this:
"If you can't live in your home due to a covered loss, we'll cover the additional necessary living expenses, enabling your family to maintain its normal standard of living."
I was wondering if in order to streamline the process I can use the following procedure:
1. Get copies of previous receipts (before fire) to prove what average costs I had in the house (utilities, cable, internet, etc) (say 500%/mo).
2. Get a quote from a local real estate agent of how much my house could have been rented for before the fire(say 1500$/mo).
3. Get an estimate from a furniture/electronics rental store of how much would cost me every month to rent all my furniture and appliances (say 2000$/mo).
4. Ask my company to pay me 2+3-1 every month (1500+2000-500=3000$/mo).

Thanks, George

[Tim Dodge]

George,
First, I'm very sorry about the loss of your house. I hope your family and you are able to recover financially and emotionally very soon. Regarding the Additional Living Expense Coverage, any documentation you have regarding your prior monthly expenses can only help, so I would encourage you to amass as much as you can. On the second point, I don't think the amount you could have rented the home for is relevant, because you were/are making mortgage payments on it. The relevant numbers are the amount you were paying per month for housing before the fire and the amount you're paying now. If you were making a $1,500 a month mortgage payment before, and now you're making the mortgage payment AND paying $2,000 a month for rent, then your extra cost is $2,000. The quote for renting furniture, appliances, etc. will be helpful if your temporary home is unfurnished.

The insurance company will take all of your changes in cost (both the costs that increased and those that may have gone down), add them together, compare that number to what you were paying before the loss, and pay you the difference if the new cost is higher. So, if you're now paying an extra $2,000 for rent but your utility costs have dropped by $100, the insurance company will subtract that $100 from the additional amount for rent. It will pay this amount until the end of the shortest time necessary for you and your family to settle in a new permanent home.

I wish you and your family well.