Ordinance or law coverage is an additional homeowners insurance coverage that helps cover the increased cost of complying with local building codes after a covered loss.
As a homeowner, you're likely aware of the importance of insurance coverage. You want to protect your property and investments in case the worst happens, whether that's a natural disaster, theft or some other unforeseeable circumstance. But have you considered the role of ordinance or law coverage in your insurance policy? This optional coverage is often overlooked, yet it can be critical in the event of a catastrophe.
What Does Ordinance or Law Mean?
It refers to a set of local or state codes that dictate the building standards and zoning regulations within a given area. These codes exist to ensure that buildings are structurally sound, safe, and compliant with environmental and health standards, and they may change over time to reflect new information or safety concerns. Think of things like upgraded plumbing or electrical wiring requirements.
How Does Building Ordinance or Law Coverage Work?
If your house is badly damaged by a storm or a covered peril and requires extensive repairs, your local building code may require that the damaged portion be rebuilt according to the updated standards. It may even require you to demolish your house and rebuild the entire thing from scratch. Your standard homeowners insurance policy may not offer this coverage with their base policy and may only pay to restore your home to its original state. This is where ordinance or law coverage would come into play.
Ordinance or law is an optional coverage offered by most insurance companies to help pay for the additional construction costs required to satisfy building code requirements. This coverage is usually offered up to a limited amount, typically a percentage of your home's dwelling coverage. We usually see this percentage ranging from 10% - 50%.
What is Covered?
Usually building ordinance or law coverage covers three different areas:
Updating a damaged part of your home: can help pay for unexpected required upgrades while you're repairing a damaged part of your house.
Rebuilding or updating an undamaged part of your home: in some cases , building code updates might require you to make changes to parts of your house that didn't suffer damage. Ordinance or law coverage can sometimes help with this to.
Demolition: if a covered disaster destroys your house, a homeowners policy may help pay to remove the debris so you can rebuild. But say your home is only partly damaged and local law requires you to tear down the rest of it. In that case, ordinance or law coverage may help pay towards the cost of demolition and debris removal up to policy limits.
Why Ordinance or Law Coverage is Important:
Building codes and regulations are constantly changing and becoming more strict, which means that even if your property was built to code when it was originally constructed, it may not meet current standards. This can increase the cost of rebuilding your property in the event of a disaster. Without ordinance or law coverage, you may be left with a large out-of-pocket expense that can be difficult to cover.
Ordinance or law coverage may not be something you've considered before, but it's a critical element of insurance coverage for any property owner. Understanding what it is, how it works, and what your policy covers can help you make informed decisions about your insurance needs and protect you against unexpected costs. As always, we recommend consulting with an insurance professional to ensure that you have the right coverage for your unique situation. With the right policy in place, you can have peace of mind knowing that you're protected against even the most unforeseeable circumstances.