Homeowner’s insurance: Who’s going to pay the bills when you can’t go home?
January 9th, 2012
Leslie Elman
Your home insurance policy typically covers the cost to replace personal property and make structural repairs to your home when disaster strikes. But who pays your expenses when your home is temporarily uninhabitable?
All kinds of disasters can strike your home. For instance, thousands of fires damage homes each year. The U.S. Fire Administration reports that in 2010, more than 362,000 residential fires were caused by such things as cooking mishaps and electrical malfunctions. These blazes resulted in more than $ 6.6 billion in property losses.
“People don’t think about what happens if, say, their house is (destroyed) by fire and it takes eight or nine months to rebuild,” says David Walker, president of Hartland Insurance Agency in Hartland, Mich.
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| If a fire damages your home, the additional-living-expenses part of your home insurance policy will pay for temporary lodging and other needs. |
During that time, you have to live someplace else, but your mortgage company still will expect payments. Ditto for the electric company, the tax collector and so on.
The good news: You’re protected
This is when Coverage D in your home insurance policy kicks in, better known as loss of use (LOU) or additional living expenses (ALE) coverage. “Additional” means what you spend over and above your usual monthly expenditures to maintain your normal standard of living for the period of time your home is uninhabitable. ALE coverage pays for expenses associated with your temporary accommodations so you can continue to cover your regular monthly bills.
Immediately after your home is damaged, ALE coverage covers the cost of a short-term hotel stay. Once an insurance adjuster determines the extent of home repairs and how long they should take, ALE coverage assists with temporary accommodations that are equivalent to the home you’ve left behind.
In most cases, you should be able to relocate locally. This is critical when you need to go to work, the kids have to go to school and you want to check in with the contractors repairing your home. But that might not be possible if your home is damaged by a natural disaster that affects a lot of homeowners in your area.
After Hurricane Andrew in 1992, people from Miami had to go as far as Vero Beach, Fla. — 140 miles away — to find housing, says David Thompson, an instructor for the Florida Association of Insurance Agents. “The cost of living and time out of the house can be very different in a catastrophe loss,” he says.
What’s covered?
The primary additional living expense covered is the rent for your temporary home. Other expenses that may be covered include:
• Utilities in the temporary home.
• Reasonable expenses for restaurant meals.
• Laundry and cleaning.
• Transportation expenses (if, for example, your cost to commute to work increases).
• Kennel fees for pets you can’t bring with you to your temporary residence.
Don’t ever assume
Always ask your insurer what’s covered before you spend money that you think should be reimbursed, and keep records of what you spend.
“Your insurance company has a range of expenses they expect to receive,” says Brian Allred, a Liberty Mutual agent in Ontario, Calif. “This is not free money; it’s money that’s available to help you survive in an emergency.”
Your insurer can and will deny claims for things it deems excessive, so don’t expect to dine on lobster and champagne while you’re out of your home.
ALE coverage is standard in home insurance policies, but the amount can vary. Review what your policy provides, and upgrade if you think it’s not adequate. The typical home insurance policy builds in ALE coverage at 20 percent of your home’s insured value. So, if your home is insured for $ 250,000, your ALE coverage would be capped at $ 50,000. Some policies might go as high as 50 percent.
To determine whether that percentage is enough, consider:
• How much it will cost to rent a home that’s comparable to yours.
• What you might expect to spend for meals if you ate three times a day in moderately priced restaurants.
• What your expenses for utilities might be.
“Remember that it can be very costly to rent an apartment or a house short term,” says Audrey Kessler, vice president of New York insurer HUB International. “The monthly rate for a temporary rental can be double the monthly rate in a one-year lease. Also, if you have to turn on the water, electricity, phone, cable TV or other utilities, you usually have to pay deposits. These expenses add up.”
Beefing up your coverage
Knowing these things, how long would your coverage sustain you?
If the figures don’t satisfy you, ask your insurance agent about coverage based on “actual loss sustained” (ALS), which provides unlimited additional-living-expense coverage for a limited period. Those periods vary by state. This is a common alternative to the typical 20 percent ALE coverage, requiring a nominal increase in your insurance premium. In addition, Kessler says, some insurers offer ALS coverage with no dollar limit and no time limit.
Why upgrade your ALE coverage? Because reaching your limit and having to shoulder these added expenses is the last thing you want when you’re displaced from your home.
“People think things will never happen to them, but things do happen,” Liberty Mutual’s Allred says. “This is why you have insurance.”
Gina Roberts-Grey
Is there really such a thing as moonlight madness? And does a full moon drive motorists mad? The answers may surprise you.
“There is a long history of belief that people ‘act crazy’ during a full moon,” says Dr. Jeffrey Schwartz, a research psychiatrist at UCLA and co-author of “You Are Not Your Brain.”
Although numerous studies have disproved the theory that people go bonkers when the moon is full, Dr. Carole Lieberman, a psychiatrist in Beverly Hills, Calif., says the lunar cycle still can mess with your mind and body. That may include some uncharacteristic and potentially dangerous driving behavior that could result in a traffic ticket, a car crash or both. And a ticket or crash could easily trigger a hike in your auto insurance premium.
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However, no scientific study has established a direct link between a full moon and a rise in car crashes. The Insurance Institute for Highway Safety, the Governors Highway Safety Association and the Insurance Information Institute don’t have any statistics regarding full moons and traffic safety.
“Believing that the moon can make you crazy becomes a self-fulfilling prophecy, so you begin acting on false beliefs and do things that you would otherwise never do,” Schwartz says.
Full moon agitates some drivers
That’s why experts warn motorists to exercise caution when they’re driving along full-moon-lit roads.
“There is a tendency for people to be more agitated during the full moon. Anything perceived as provocative, such as being cut off while driving, could lead to an outburst on the road,” says Dr. Michael Finkelstein, founder of SunRaven, a wellness center in Bedford, N.Y. “It is prudent to drive carefully (all of the time), of course, but during the full moon, special attention and patience is warranted.”
A 2003 study by Britain’s Churchill Insurance Group supports Finkelstein’s note of caution. The Churchill study, which examined 3 million auto insurance policies, showed that car crashes occurred 14 percent more often during a full moon compared with a new moon.
“We know that the moon is a strong source of energy, as it affects the tides and weather patterns, but were surprised by this bizarre trend,” a Churchill executive said when the insurer’s study was released.
John Crabb, a retired cop in Bloomington, Ill., says he always was busy when he worked on a night with a full moon.
“It seems like on those nights I also heard the craziest excuses for why someone was speeding, running stop signs and so on. Once a person tried to get out of a ticket claiming he was possessed every full moon,” Crabb says.
The fatigue factor
Aside from odd behavior during a full moon, you may be susceptible to full-moon-induced drowsiness. The extra light emitted by a full moon can cause insomnia, as people fall asleep and stay asleep more easily in total darkness.
“The gravitational effects of the full moon are at their peak. In physiologic terms, our bodies experience greater ‘tugging’ during this time, and some people are quite sensitive to this effect,” says Finkelstein, the SunRaven founder.
That tugging — and the associated lack of sleep — can prompt you to be less alert or even to nod off behind the wheel.
“Fatigue is a major factor in accidents while driving,” Finkelstein says.
“The extreme example is people falling asleep and driving off the road or into oncoming traffic. But sleepiness is associated with difficulty concentrating, which could make it harder to monitor your speed, stay within the lines or see unexpected or moving objects in your path. Being exhausted can also make you more sensitive and more likely to react aggressively when provoked in traffic.”
Drowsy driving causes more than 100,000 crashes a year, resulting in 40,000 injuries and 1,550 deaths, according to the National Highway Traffic Safety Administration.
Wild animals
It isn’t just yourself and other drivers that you may want to look out for when there’s a full moon. You also may want to keep an eye out for crazed critters.
“I always prepare for a busy night when it’s a full moon because full-moon nights are often my busiest emergency shifts. They tend to be filled with the most bizarre cases,” says Dr. Jennifer Hennessey, a veterinarian in Sugar Land, Texas. “Animals’ behavior is different on these nights.”
A 10-year study released in 2007 by Colorado State University’s veterinary school established a potential link between a spike in emergency room visits for dogs and cats and the moon being at or near its fullest.
Hennessey says it’s not uncommon for dogs and cats to run into the streets more often during a full moon. “One full-moon night, I had three dogs and one cat who had all been hit by cars arrive within 15 minutes,” she says.
Hitting an animal can do hundreds or thousands of dollars of damage to a car. R.J. Lehmann, deputy director of The Heartland Institute’s Center on Finance, Insurance and Real Estate, says that as long as you have optional comprehensive coverage, your auto insurance should cover damage from an animal accident, but you’d have to pay your deductible.
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