Ordinance or law coverage is an insurance endorsement that covers the cost to rebuild a destroyed property, as well as the cost to upgrade a home so that it meets the most up-to-date building codes after a covered loss.
Imagine there was a bad storm. You own a building in the area that was hit by the storm. The good news is that you have Property Insurance Coverage for that building. You may even have Wind Coverage, Flood Coverage or Hurricane Coverage.
Now imagine this….your building was hit. It wasn’t destroyed, which is good news but you have a building that suffered windstorm damage to one wall.
Engineers come to inspect the property and they insist that the remaining three walls of the building were weakened by the windstorm as well, and they deem the entire building to be unsafe. The State Property Maintenance Code requires you to evacuate and to knock down the whole building, and rebuild to be in compliance with the city’s code.
Now, your damaged wall is covered by your insurance policy because you have insurance coverage for windstorm damage. But what about the cost of knocking down the whole building to comply with the city code?
Let’s imagine another scenario, the building was pretty damaged but fixable. The problem? Since the last time you did construction on your property, the building codes have changed. The new building codes did not apply to existing properties, so you didn’t have to update your building to reach current standards.
However, once you do extensive construction, you must make sure the entire building complies with the new standards. Bringing your building up to code will cost you time and money.
What is Ordinance or Law Insurance Coverage?
Ordinance or Law Coverage is an additional feature of a property policy that helps cover the costs of repairing a damaged building to comply with updated building codes.
Often, fixing extensive property damage while also ensuring the construction is up to code standards can be a costly venture. But by purchasing ordinance coverage, you can have financial assistance in paying these costs.
Building codes change frequently and are usually only directed towards new construction. When you must rebuild or renovate, you typically discover that the codes which you adhered to the last time you renovated have become outdated.
When your property is damaged to the point that it requires construction, your local government will require that all additions and reconstructions comply with current building codes.
In many cases, this new reconstruction will cost more than your standard policy will cover, as the policy will not cover the cost of bringing a property up to the current code.
Ordinance coverage works by helping you pay for demolition costs, loss of value costs, and/or increased construction costs.
For example, if a fire damages 70% of your property. Local building codes state that when more than half of the property is destroyed, the entire structure must be demolished and rebuilt.
Your Property Insurance Policy will only cover the 70% that was damaged. Ordinance policy will cover the costs of tearing down the remaining 30% and rebuilding the entire property up to the current code.
Most standard policies have ordinance and law exclusions, so it is essential that you fully understand if you are covered and how to add this coverage to your policy.
Different Parts of Ordinance and Law Coverage
There are three types of Ordinance or Law Coverage. Each part is added and negotiated separately:
Coverage A – Undamaged Portion of the Building.
When an Ordinance or Law requires an Insured to tear down the undamaged portion of a building, this coverage protects the value of the undamaged part of the building.
Coverage B – Demolition.
When an Ordinance or Law requires an Insured to tear down the undamaged portion of a building, this coverage pays for the cost to demolish and haul away debris from the undamaged portion of the building.
Coverage C – Increased Costs of Construction.
When an Ordinance or Law requires modifications in how a building must be repaired or reconstructed, this coverage protects the increased costs of construction associated with repairing or rebuilding the structure to the code existing at the time of the loss. Coverage usually applies to both the damaged and undamaged portions of the building.
Ordinance or Law Coverage Endorsements
Every Ordinance or Law Coverage endorsement differs based on different insurers and the risks of each property. Coverage wording is not standardized between insurers, which means that different policies with different carriers can have vastly different coverages and protections.
In the case of a non-standard endorsements, it is important that you use a qualified insurance agent so that you are fully covered in the case of most events.
Ordinance or Law Coverage endorsements or O&L Coverage Endorsements can be added to existing policies. There is no need to write a new policy. You can contact an agent at Fidella Insurance Agency today to learn what your O&L Coverage options are.
Contact Fidella Insurance Agency today to make sure that you are appropriately covered.