Ordinance or law insurance can cover the additional costs of rebuilding, replacing, or demolishing damaged property, up to your policy limits, necessary to comply with local ordinances or building codes. Without ordinance or law coverage, you may be on the hook for thousands of dollars in extra damage-related expenses if your home is not in compliance.
Ordinance or law coverage is often included in a standard homeowners insurance policy or may be available as an endorsement, or policy add-on.
What does ordinance or law insurance cover?
After a covered loss, ordinance or law coverage can help you pay for necessary upgrades to ensure your property complies with local building codes and ordinances, including those affecting your home’s construction or plumbing and electrical systems.
Ordinance or law coverage is typically triggered by the same losses covered by your dwelling insurance (Coverage A) or other structures insurance (Coverage B). It can help you pay for claim-related costs, up to your policy limits in three ways:
Upgrading the damaged portion of your home
Ordinance or law coverage can help cover the cost of mandatory upgrades to the portion of your home damaged by a covered peril.
Say, for example, that a fire destroys your kitchen. During repairs, you find that your kitchen no longer meets modern circuit requirements, and you need to upgrade the electrical system in that space. Ordinance or law coverage can help cover the upgrade costs.
Upgrading undamaged portions of your home
In some cases, damage to one part of your home can lead to issues in other parts of your home. However, your dwelling coverage likely won’t cover additional repairs. Ordinance or law insurance can bridge the financial gap.
Say, for instance, a pipe unexpectedly bursts in your laundry room. After you file a claim and begin repairs, you discover your plumbing system is outdated and out of compliance. Your standard dwelling coverage won’t cover the additional costs of bringing the plumbing up to code. Ordinance or law coverage can help you pay for the extra expenses up to your policy limit.
Demolishing part of your home
If you need to demolish a part of your property to meet local laws or building codes, ordinance or law coverage can help pay for demolition expenses not covered by your dwelling or other structures insurance.
For example, a tree falls and damages just over 50% of your garage during a severe storm. You file a claim and expect to begin the repair process. However, local laws require the garage to be demolished, not repaired, since more than 50% of the structure is damaged. Ordinance or law coverage could pay for the necessary demolition costs up to the policy limit.
What’s not included in ordinance or law insurance coverage?
Like other types of insurance, ordinance or law coverage can vary by insurer, policy, and location. However, this type of insurance generally won’t cover the following:
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Damage not covered by your standard homeowners insurance, such as flood, earthquake, or sinkhole damage
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Undamaged parts of your home that don't require demolition or rebuilding to meet local codes
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Cost to meet building codes for things that are unrelated to a covered loss, such as routine maintenance or renovations
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Cost of cleaning up, responding to, or measuring the effects of pollutants like asbestos or other hazardous substances
The best way to determine what your ordinance or law coverage includes is to contact your insurer to ask about covered issues and any exclusions.
Do you need ordinance or law coverage?
Building codes are updated more frequently than you might imagine, especially in communities at increased disaster risk. As such, ordinance or law coverage can be a worthwhile investment.
For instance, Florida may implement new ordinances to address the rising threat of hurricanes. Similarly, California may require property owners to harden or reinforce their homes to protect against earthquakes or wildfires. That alone may make ordinance or law coverage worthwhile.
Ordinance or law coverage may also provide significant benefits if you live in a home built before the implementation of stricter building codes or laws with more stringent demolition requirements after damage.
Speaking to a local building inspector or construction expert can help you determine what ordinance or building code issues, if any, you may encounter should your home sustain damage. Using that information can help you assess whether ordinance or law coverage makes sense for your property.