A loss can render a unit or entire building uninhabitable due to the level of damage sustained. Even though a unit or building cannot be occupied, an owner continues to carry the costs of that unit.

Mortgage payments are still due, strata fees continue and some utilities must be paid to prevent further damage to, and allow the repair of, the unit or building. Meanwhile, owners must find alternate accommodations at hotels or rentals.

Additional Living Expenses (ALE) coverage compensates an insured owner for increased costs of living if damages insured under the policy renders their unit uninhabitable. Generally, coverage is based on an insured maintaining, as near as possible, their pre-loss living situation. Subject to policy conditions, this coverage continues until repairs to the unit are sufficient to render it habitable again.

Example: An owner is paying a mortgage of $2,000 per month and essential utilities (electrical, gas, possibly water) of $100 per month. After a fire causes significant damage in their unit, the owner must move into a rental for $2,500 per month, plus $100 for essential utilities at the rental. In this example, the owner must also continue paying the mortgage and essential utility costs at the fire-damaged unit they own. The owner is now paying a total of $4,700 per month; whereas before the loss, they paid $2,100. In this case, ALE coverage would reimburse the owner $2,600 for the additional living expenses they are now paying.

Should an owner purchase ALE insurance themselves?

YES! Owners should absolutely seek this coverage, which generally forms part of a standard unit owner insurance policy.

However, the ALE insurance limits secured by owners vary greatly and may not provide sufficient coverage for worse-case scenario losses. The coverage available under the strata’s policy is called contingent coverage. It can also be called excess or secondary coverage. The ALE coverage available through your strata’s HUB policy only extends after an owner’s ALE insurance limit has been reached.

It is important to note that this coverage does not extend to tenants or owners who did not reside at the unit at the time of the loss.

How likely is it for a unit owner’s ALE costs to exceed their personal policy limit?

As every policy is different and limits vary, it is difficult to predict this. However, a “standard” ALE limit for a unit owner policy is $25,000. Expense levels can vary as well. Living costs are higher in large cities and lower in the suburbs.

In the example we gave earlier, an owner was incurring $2,600 per month in ALE costs. At that rate, a $25,000 limit would provide the owner about 10 months of coverage. This may seem like plenty of time, but a catastrophic loss, such as a significant fire, may take more than 2 years to restore. This may seem excessive but keep in mind:

  • Depending on the severity of damage, 1 to 3 months of mitigation, demolition and structural work are required before the full scope of actual repairs is established.
  • An average of 1 to 2 months is needed for the required team of professional consultants (engineers, architect and appraiser) to prepare detailed drawings and specifications necessary for both permitting and tender of the project to contractors.
  • At least 1 month is needed for contractors to prepare estimates and have them
  • Depending on the municipality, the permitting process for final repairs can be 6 months or longer. By this time, 12 months may have passed before final repairs commence.
  • Final repairs take an average of 12 months to complete, though this can vary depending on the size and complexity of the project.

Based on that average timeline, despite an owner having about 10 months of coverage through their personal policy, it is likely displacement will be 24 months or longer.

Is ALE coverage under the strata’s policy really that valuable?

Based on the five largest fire losses at strata complexes in BC since 2016, HUB has provided an average of $910,970.87 per loss in ALE coverage to displaced owners. This coverage often came into effect after owners exhausted their own coverage. Without the coverage provided through their stratas, owners would have had to pay those costs themselves.

As projects become more complex and construction costs rise, unit owners may find themselves without a home for longer periods of time. Today, it’s more critical than ever to have the right insurance and coverage limits - not only to protect yourself - but to ensure any contingent coverage available to all owners under the strata’s policy goes as far as possible.