Are You Covered? The Critical Importance of Additional Living Expense Insurance for Strata Owners

A new acquaintence was recently telling me about how they were displaced from their condo after a major flood happened in their building and they were STILL not able to move back in more than 1.5 years later. As if that wasn’t bad enough, they then proceeded to tell me a horror story of how they discovered that their insurance did NOT cover their additional expenses for things like the hotel, barage of take out food and extra travel that they had to incurr in finding a temporary place to live while their condo was being repaired. The financial burden was enough to basically bankrupt them and it was a brutally expensive lesson to learn the hardest way possible. This prompted some conversation about how to avoid this horrific circumstance in the future and I wanted to share with you the lessons learned so that you can hopefully avoid this situation in your future too!

As a strata unit owner (condo/townhouse/bare land strata etc.), you’ve secured a wonderful investment and a place to call home. Your strata corporation maintains a master insurance policy, which covers the building’s structure, common property, and assets. You likely have your own personal insurance to cover your belongings and liability too, but there’s one vital component of your individual policy you cannot afford to overlook: Additional Living Expense (ALE) Insurance, sometimes called “Loss of Use” coverage.

This isn’t just an optional extra—it’s your financial lifeboat if a disaster strikes your building. So, what the heck is it?

What is Additional Living Expense (ALE) Coverage?

Simply put, ALE coverage is designed to reimburse you for the increase in your cost of living if a covered event (like a fire, major water damage, or explosion) renders your unit uninhabitable and forces you to move out temporarily.

Here’s the critical distinction: ALE does not pay your normal expenses (like your mortgage, strata fees, or regular groceries—you still have to pay those!). It covers the additional costs you incur because you’ve been displaced.

What ALE typically covers:

• Temporary Housing: The cost of a hotel or temporary rental accommodation above what you normally pay for your unit.
• Increased Food Costs: The extra money you spend on restaurant meals or delivery if you don’t have access to a kitchen.
• Other Expenses: Increased transportation costs (if your temporary home is further from work/school), pet boarding fees, laundry service costs, and even storage unit fees for your belongings.

The Strata Reality: Why ALE is Non-Negotiable

As a strata owner, you face a unique set of risks that make robust ALE coverage essential:

1. Mass Displacement: A large-scale event (like a roof fire or a major flood impacting multiple floors) can render an entire building or a significant section uninhabitable. The repair process for strata buildings is often complex, involving multiple owners, the strata council, and large-scale common property repairs. This can take many months, or even years.
2. Strata Master Policy is Secondary: While some strata master policies may contain contingent or excess ALE coverage, it is specifically designed to only kick in after the displaced owner has exhausted the limit on their personal ALE policy. Relying solely on the strata’s coverage is a gamble.
3. Your Bills Don’t Stop: Even if you’re forced to live elsewhere, you are still responsible for your mortgage payments, property taxes, and monthly strata fees. Without ALE, you’d be paying for two residences—your temporary accommodation and your original unit—a crushing financial burden for most families.

The Dangerous Implications of Insufficient Coverage

The most significant risk with ALE is underinsurance, which happens when your policy limit isn’t high enough to cover the actual costs of displacement.

Imagine this scenario: A fire forces you out of your unit. Repairs are projected to take 18 months due to material shortages and complex strata approvals.

If your personal insurance policy only has an ALE limit of $30,000 (a common limit, often set as a percentage of your contents coverage), you would run out of coverage in less than 10 months.

The Implication? You would be personally responsible for the remaining $27,600 in additional living expenses for the rest of the repair time—all while still paying your mortgage and strata fees. For most people, this kind of unexpected expense can lead to severe debt, cashing in retirement savings, or even being forced to sell your unit under duress.

The Action Plan: What You Need to Do Today

Don’t wait for an emergency to find out you’re underinsured. Take these steps immediately:

1. Review Your Policy: Locate your current condo or strata unit owner’s insurance policy and find the section for “Additional Living Expenses” (ALE) or “Loss of Use” (Coverage D). Note the dollar limit and the time limit (e.g., 12 or 24 months).
2. Assess Your Need: Calculate a realistic worst-case monthly cost for temporary housing and other increased expenses in your local market. Multiply that by at least 18-24 months. Does your current limit match this total?
3. Talk to Your Broker: Contact your insurance professional and discuss increasing your ALE coverage limit. In some cases, you may be able to add an endorsement for “Actual Loss Sustained,” which removes the arbitrary dollar limit, ensuring you’re covered for the entire reasonable time needed for repairs.

Your strata unit is more than just a place; it’s a significant financial asset. Protect it—and your financial future—by ensuring you have adequate Additional Living Expense coverage. It is the single most important protection for your personal life after a major building disaster.