Ordinance or law coverage is an important part of homeowners insurance that helps cover the cost of bringing your home up to current building codes after it has been damaged. Local governments update building codes regularly to enhance safety, and complying with these new regulations can be expensive. This coverage ensures that you won’t have to pay out of pocket for these mandatory upgrades.
Key Points:
- Provides financial assistance to update your home to current codes after damage.
- Covers the cost of bringing undamaged parts of your home up to code.
- Essential for homes in areas with frequently updated building codes.
How Ordinance or Law Coverage Works
When your home is damaged by a covered peril, your standard homeowner’s insurance typically covers the cost to repair or replace the damaged portion. However, if local building codes have changed since your home was built, you may need to make additional upgrades that are not covered by your standard policy. This is where ordinance or law coverage comes in, covering the extra costs to bring your home up to current standards.
Example:
Suppose a fire destroys over half of your home. If your local building code requires that any building more than 50% damaged must be completely demolished and rebuilt to current codes, your basic homeowners insurance will cover the cost to rebuild the amount that was damaged. Ordinance or law coverage will then cover the cost of demolishing the remainder of your home and ensuring the entire structure is up to code.
Do You Need Ordinance or Law Coverage?
To avoid paying out of pocket for mandatory upgrades, it is crucial to have ordinance or law coverage. Several situations might require ordinance or law coverage, including:
- New Weatherproofing Codes: New codes may require upgrades like storm windows or elevated foundations in areas prone to storms.
- New Fire Safety Codes: Local codes may require installing fire extinguishers or sprinkler systems.
- New Accessibility Codes: You might need to add features like ramps or lower light switches.
- New Plumbing and Wiring Codes: Safety regulations may require upgrading plumbing or electrical systems.
Ordinance or Law Coverage Types
Standard homeowners insurance policies often include limited ordinance or law coverage, typically around 10% of the dwelling coverage. However, this may not be enough for older homes with significant code updates. Additional coverage can be purchased to fill these gaps.
- Upgraded Feature Costs: Covers the increased cost required to upgrade from old features to new ones.
- Undamaged Portion Value: Compensates for the undamaged portion of the building that needs to be demolished to comply with codes.
- Updating Undamaged Areas: This covers the additional costs of bringing undamaged sections of your home up to current standards.
- Foundation and Related Upgrades: Covers necessary upgrades to foundations and related features.
Are Mandatory Upgrades Covered?
Most homeowner’s policies include some ordinance or law coverage, usually with a limit of around $10,000. This may not be enough for extensive updates, but you can increase this coverage through endorsements for better protection against mandatory upgrades.
How Much Does Ordinance or Law Coverage Cost?
Adding more ordinance or law coverage to your policy is usually quite affordable. Increasing your coverage will likely only raise your annual premium a small amount. Given the potential costs of mandatory upgrades, this additional coverage is a cost-effective way to protect yourself from significant financial losses.
Special Considerations
The need for ordinance or law coverage often depends on the age and location of your home. Older homes and those in areas with frequent code updates, such as regions prone to natural disasters, typically require more coverage. Consulting with a builder or home inspector can help you determine if you need additional ordinance or law coverage.
Sources:
https://www.trustedchoice.com/homeowners-insurance/home-coverage-types/ordinance-or-law/
https://www.hippo.com/learn-center/building-ordinance-or-law-coverage
https://www.investopedia.com/terms/b/building-ordinance-coverage.asp
Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.
