Additional living expenses — an insured's best friend

By Christine Barlow

National Underwriter


With any loss to a dwelling, there is always the possibility that the residence will become uninhabitable for a certain length of time. When this happens, the insured must relocate to another residence temporarily while repairs are made. Since most insureds do not own second homes, this move is often to a hotel or extended living suite. The policy provides coverage for this extra expense. However, the coverage is confusing in a number of ways. What exactly makes a home not fit to live in, and what constitutes additional living expenses are significant questions regarding coverage that we will discuss here.

Not fit to live in
When the residence burns to the ground, this answers itself; the home is obviously not fit to live in. However, there are many partial losses, and whether or not they make the house not fit to live in becomes a major question. The policy does not define "fit to live in," and the coverage pays for the insured to be maintained at his normal standard of living. Therefore, if the insured cannot maintain his normal standard of living in the home, relocation is necessary. Obviously if the bedrooms are unusable, the insured must be relocated. If the house is usable but there is no air-conditioning, what then? It depends on the insured — an insured who keeps the air at 78 degrees may be fine with the windows open, but an insured who normally keeps the home at 68 degrees may be excessively uncomfortable and temporary air conditioners or relocation may be necessary.

Medical conditions bring their own issues. Certain medications may need refrigeration or the insured may need a constant supply of oxygen or receive at-home dialysis. If the home cannot support these medical needs, relocation of the insured is necessary, even though the home would be habitable to someone in good health.
Dietary restrictions are another issue. If the kitchen is damaged, many families can live at home and eat out. With a very large family or a family with multiple dietary restrictions, it might make more sense to relocate them to another residence with cooking facilities instead of trying to accommodate meal needs at local restaurants.

Standard of living
What constitutes an insured's normal standard of living raises a lot of questions. The intent of the coverage is to see that the insured's life carries on as close to normal as possible. An insured who normally makes a hot breakfast cannot be expected to start eating cold cereal; the insured is entitled to what he is used to. Likewise, an insured whose normal diet consists of large quantities of cookies, chips and alcohol is entitled to those items. Just because it is not healthy food does not mean that it is not covered; what is covered is what the insured normally consumes, not what the insured ought to consume. If the insured normally drinks alcohol at dinner and the insured now has to eat meals out, then alcohol at dinner is covered.
If the insureds have a home with a pool, Jacuzzi and a collection of exercise equipment, then when they are relocated, the relocation site needs to provide that as well. Even if the insured does not always use the facilities at home they are available to him, and therefore the insured is entitled to have the same facilities available to him upon relocation.

Pets
Many people own pets and consider them to be members of the family. In the event of a loss to the dwelling, the pets must be cared for as well. For example, when the insured travels, the pets normally stay at the Feline Palace; therefore, the Feline Palace is where the pets stay if they cannot be relocated with the insured. However, if the pets normally stay with relatives, neighbors or board at the Discount Kitty Motel, then that is where the pets go. The pets do not get to upgrade their standard of living anymore than the insureds do.

In order for the cost of pet relocation to be covered, the residence must be uninhabitable for the insured. It cannot be just the doghouse that burned in order for the dog to be relocated to the Doggie Deluxe Resort; the residence premises where the insured resides must be uninhabitable as well, unless there is a legitimate reason related to the loss as to why the dog cannot be brought inside with the insured temporarily.

Conclusion
Additional living expense is one of the broadest coverages available. It pays for expenses above the normal living expenses of the insured in order for the insured to maintain his normal standard of living. If the insured's normal standard of living includes pampering the pet, having lobster for dinner and relaxing in a Jacuzzi that is the standard of living that must be provided. What is not provided is an upgrade in standard of living. An insured doesn't get to have lobster for dinner if they normally have Hamburger Helper. Like any insurance coverage, the principal of indemnity applies. Restoring the insured to his position before the loss, and not bettering that position, is the intent of the coverage.