IBABC Fundamentals of Insurance Practice Exam 2025 – Complete Preparation Guide

Additional living expenses (ALE) in a homeowners insurance policy are designed to cover the increased costs incurred when a policyholder's home becomes uninhabitable due to a covered peril, such as fire or severe water damage. This typically includes costs such as temporary housing, meals, and other expenses that may arise from the need to live elsewhere while repairs are being made to the home.

The option that correctly identifies this coverage is related specifically to the cost of renting another home when your own residence is not livable. ALE ensures that the insured can maintain a standard of living comparable to what they had before the loss, which is why it encompasses the necessary expenses required for temporary accommodation.

Other options such as the replacement of stolen items pertain to personal property coverage, while upgrades to the existing property would typically not be covered under a homeowner's policy unless specified, as insurance is focused on reverting to the previous state. Finally, medical bills for injuries sustained at home are usually covered under personal liability coverage, rather than additional living expenses.