Final answer:
In a typical homeowners policy, expenses beyond the usual household costs after a covered loss are known as additional living expenses (ALE) or loss of use coverages. These may include hotel stays and meals while the home is uninhabitable. The premiums must cover claims, operational costs, and profits for the insurance company.
Step-by-step explanation:
In a typical homeowners policy, the expenses incurred beyond the normal daily expense of maintaining a household subsequent to a covered loss would be referred to as additional living expenses (ALE) or 'loss of use' coverages. These costs are for living elsewhere if the dwelling is damaged or burglarized and becomes uninhabitable. They may include, for example, hotel bills, restaurant meals, and other living expenses incurred while your home is being repaired or rebuilt.
The average person's payments into insurance are expected to cover not only the average person's claims but also the costs of running the company, including administrative costs such as hiring workers, administering accounts, and processing insurance claims, plus a margin for the company's profits.
Insurance policies are designed to provide financial security by paying out when certain events occur, such as when medical expenses are incurred, when the policyholder dies, when a car is damaged, stolen, or causes damage to others, or when a dwelling is damaged or burglarized. However, a fundamental law of insurance must hold true: the collected premiums must be sufficient to cover claims, operational costs, and allow for profits.