What Insurance Will Reimburse for Hotel Stays Amid the Los Angeles Wildfires

There are currently more than 100,000 people in Los Angeles who have been displaced by the ongoing wildfires. As Travel + Leisure shares hotels and vacation rentals with significantly reduced rates for Angelenos who are evacuating or have lost their homes, the question becomes: How much will insurance actually cover for short- or long-term hotel stays? Put another way, how significant do hotel discounts need to be in order to not cost displaced Angelenos money out of their own pockets?

It comes down to Additional Living Expenses coverage (ALE), Divya Sangameshwar, a LendingTree insurance expert, explained.

“Insurance companies are not going to say, ‘Well this is for hotels, this is for food, etc.’ What they’re going to do is give people who have lost their homes some money for additional living expenses,” Sangameshwar said. “ALE is calculated based on how much dwelling coverage you have with your home insurance. Dwelling coverage is how much money an insurance company will give you to rebuild your home. ALE should be about 20 to 30 percent of that.”

The first thing that needs to happen: the insurance company will calculate how much your home will cost to rebuild. While Zillow reports that the average cost of a home in Los Angeles is currently $948,383, dwelling coverage will likely be much less (because a lot of the home’s sale value is in the land rather than the house itself).

“From what I’ve seen, rebuilding a house in California can cost between $200 and $400 per square foot,” Sangameshwar told us.

T+L spoke with NerdWallet home expert Holden Lewis, Michael Giusti at InsuranceQuotes.com, and Sangameshwar — and all three gave the exact same example. If your dwelling coverage is $500,000, and your ALE is 20 percent of that, then you’ll likely have $100,000 to cover living costs. (“This includes rent or a hotel room, but it could also include costs such as boarding a pet, additional transportation needs, storage units, or additional food costs that you wouldn’t have had if you had access to your home,” Giusti said.)

If your house takes two years to rebuild, that means you’ll have $50,000 a year, which comes to $961 a week or $137 a day.

Of course, this is just one example. The more expensive the home, the more dwelling insurance will be, and therefore, the more ALE money available. On the flip side, ALE insurance money is just for homeowners with iron-clad policies, so someone with an insurance plan that doesn’t have wildfire coverage could get less. And renters without insurance will not have access to insurance like this.

It’s also important to consider that many Angelenos will have to pay for living expenses like hotels and vacation rentals up front and then be reimbursed. “Each insurance company has its own way of doing things, but a lot of them will expect you to pay your living expenses, and then submit the receipts for reimbursement,” Gusti said. Both Sangameshwar and Lewis agreed.

Sangameshwar added that rebuilding homes in L.A. is “going to take longer than you think.” For those who lost their homes and are going to collect ALE, it will be all about making the money last through a lengthy rebuilding process.

“The takeaway for people working in the hotel industry is any kind of discount — long-term or short-term discounts, accepting points, etc. — they offer is going to be helpful to help people stretch their dollars further while their homes are getting rebuilt,” Sangameshwar said.

T+L encourages hotels and vacation rental companies that still have space to comment at the bottom of this article and let displaced locals and travelers know about free rooms or discounts. You can also email mae.hamilton@dotdashmdp.com; maya.kachroo-levine@dotdashmdp.com; and nina.ruggiero@dotdashmdp.com.