Allocated Loss Adjustment Expense (ALAE)
A claim-handling expense that can be assigned to a specific insurance claim, such as defense attorney fees, expert-witness fees, or investigation costs.
What does Allocated Loss Adjustment Expense (ALAE) mean in insurance?
Insurers distinguish allocated loss adjustment expenses from unallocated loss adjustment expenses, which support claim operations generally and cannot be tied to one claim. Whether ALAE reduces a liability limit depends on the policy wording.
Exam-ready definition
A loss-adjustment cost directly attributable to a particular claim.
Example
The fee paid to an attorney to defend one liability lawsuit is generally an allocated loss adjustment expense.
Common misconception
ALAE is an expense associated with settling a claim, not the indemnity payment made to the claimant.
Sample insurance exam question
An expert is hired solely to investigate one property claim. How is that expense typically classified?
Show answer
As an allocated loss adjustment expense, or ALAE.
Related insurance terms
Don't just memorize terms.
Master the exam.
Get access to 650+ exam-like questions, detailed explanations, and specific state law-supplements for your state.
Which of the following best describes the concept of Allocated Loss Adjustment Expense (ALAE)?