Translation:All families have their traditions.
I am still a bit puzzled for not accepting: Every family has its own traditions. I noticed that Alla is often translated to Every even in Duolingo. To me it is more natural to say in English: Every family rather than All families (both being correct). I also think the meaning is in English slightly different. Isn't it that Alla är sjuka. is better translated to Everyone is sick and vice versa?
The reason – whether it's correct or not is another question – but the reason is that we've felt that there exists a much better Swedish counterpart to every, which is varje. I actually don't think it's true that we often translate alla into every in this course – I'm pretty sure we never do in the main translations, and if we accept it in some places, then rarely.
Of course alla on its own means everyone, but that doesn't change the meaning of every.
You could definitely say Varje familj har sina egna traditioner in Swedish, and it would mean something slightly different from the above sentence. As far as I can tell, it's pretty much the same difference as in English. (I'd probably prefer the version with varje in Swedish myself).