A tropical storm blows through your town, scattering debris and shattering a couple of your home’s windows. You submit a claim to your homeowners insurance carrier, expecting them to pay for new windows. However, when it comes time to undertake the job, you discover that the most recent building rules in your area require hurricane shutters or impact-resistant glass on all windows, which you did not have.
Your home’s insurance will pay enough to replace your windows with ones that are comparable to the ones you had. However, it will not cover the additional costs of replacing the glass or purchasing shutters.
In situations like this, ordinance or statute coverage can be useful.
What is ordinance or law coverage?
Ordinance or law coverage is insurance that pays to put your home into compliance with current building rules following a covered claim.
A homeowners insurance policy is intended to assist you in restoring your property to its pre-damage condition, rather than making enhancements. So, if the most recent construction rules require improved wiring or better wind-resistant roofing than you previously had, your policy’s dwelling coverage will typically not cover those costs. Ordinance or statute coverage could close the gap.
Your homeowners insurance policy may contain a limited amount of ordinance or law coverage, but you may usually purchase more as an add-on.
What does ordinance or law insurance cover?
Ordinance or law coverage compensates for three types of expenses that local building codes may impose.
Updating a damaged part of your home
As previously stated, ordinance or law coverage might pay for unforeseen renovations while you fix a damaged area of your home.
Example: One night, dinner goes horribly wrong, and your kitchen catches fire. Among other things, the pipes to the kitchen sink are damaged, and a contractor informs you that your plumbing is years out of date. Ordinance or legislation coverage may pay for the necessary modifications, subject to the insurance limit.
Rebuilding or updating an undamaged part of your home
Building code modifications may compel you to make changes to portions of your home that were not damaged. Ordinance or legislation coverage can also aid in this regard.
Example: Imagine that a more severe fire spreads through multiple rooms before firefighters get it under control. In some locations of the United States, houses that are more than 50% damaged must be demolished rather than restored. However, your homeowners insurance will normally only cover the cost of rebuilding the damaged portion of your property. Without ordinance or law coverage, you would be responsible for the remaining rebuilding costs.
Here is another example. Assume you file a claim for water damage due to a burst pipe. Your home’s knob-and-tube wiring is old and has to be changed, both in the room where the pipe burst and throughout the house. A normal homeowners policy is unlikely to cover wiring in the undamaged portion of your property, however ordinance or law coverage would.
Demolition
If a covered calamity damages your home, your homeowners insurance may pay to remove the wreckage so you may rebuild. But suppose your home is just partially destroyed and local law mandates you to demolish the remainder of it. In this scenario, you may require ordinance or legislation coverage to cover the entire cost of demolition and debris removal.
Do you need ordinance or law coverage?
Building codes and other municipal requirements change on a regular basis, so every homeowner should consider ordinance or law coverage.
Check your homeowner’s policy or call your agent to verify if you already have coverage. For example, you could get ordinance or law insurance for up to 10% of your dwelling coverage limit. So, if your home’s construction is insured for up to $250,000, you’ll have $25,000 to go toward compliance with local ordinances and regulations.
However, if your home is older, you may wish to raise this restriction. Has it been a couple decades since you changed your electrical, plumbing, or HVAC systems? If so, your home may be severely out of compliance with current regulations. If something goes wrong, you may be happy for a generous ordinance or statute limit to make the necessary corrections.
