Building Ordinance or Law Coverage For Homeowners
When’s the last time you settled into your comfy chair by the fireplace — hot beverage in hand — to read your local building codes? Chances are, not any time recently. But it’s important to know these building codes regulating everything from your home’s plumbing system to its electrical wiring are essential and that they typically change every few years (sometimes more often).
Here’s why it matters to you: If your home’s damaged and needs to be rebuilt, you’ll need to follow any new building codes in your community. However, standard homeowners insurance policies won’t cover the additional costs of complying with these new codes.
That’s why you might consider a type of rider called building ordinance or law coverage (sometimes known as building codes coverage). Let’s explore what it is, what it covers and why you might need it.
- If you have to rebuild your home or other structures on your property, ordinance or law coverage pays the increased costs of complying with new building codes.
What is building ordinance or law coverage?
Ordinance or law coverage is an add-on to your homeowners insurance policy covering the costs of getting your home and other structures up to code when they have to be rebuilt after a covered loss.
For example, let’s say that your home insurance policy covers fires (and most do!), and a fire damages 70% of your home’s structure. Let’s also say that your city follows a standard building code requirement that, if more than 50% of your home is damaged, you have to tear down the entire structure and rebuild it following current codes.
Likely, your home insurance policy will only pay to replace the 70% of your home’s structure that was damaged. That wouldn’t be enough to rebuild your entire home, as your city’s code requires.
That’s where ordinance or law coverage comes in. It would pay you to tear down the remaining 30% of your home and rebuild it, while also covering the costs of complying with new codes.
What does ordinance or law insurance cover?
Ordinance or law coverage provides three main areas of protection if your home or other structures on your property are damaged:
- Required upgrades: Pays for the increased costs of making sure your home complies with new building codes (like new requirements for electrical wiring, plumbing units, HVAC systems, roofing, fencing, etc.) when you have to rebuild.
- Undamaged portion: Reimburses you for the intact portion of your home if a building code requires you to demolish your home.
- Demolition: Covers the costs of demolition and debris removal if a building code requires you to demolish your home.
Many policies offer ordinance or law coverage equal to 10%, 25% or 50% of your policy’s dwelling coverage. For example, suppose your dwelling coverage is $300,000, and you have a 10% ordinance or law policy. In that case, you’ll receive $30,000 to pay for any required upgrades or reimburse you for the undamaged portion of your home and any demolition costs, if applicable.
New building codes could require you to update your electrical wiring, plumbing systems, HVAC systems, roofing materials or fencing, among other home features.
What does ordinance or law insurance not cover?
Ordinance or law coverage only takes effect after your home or other structures have been damaged by some named peril in your policy (things like fire, lightning, falling objects, windstorms and other events). It doesn’t pay the costs of getting your home up to code after a renovation or routine maintenance.
For instance, if you decide to remodel your basement and later find out that you need new electrical wiring to comply with your city’s code, your ordinance or law policy won’t cover those costs. However, if you need to redo your basement because a fire destroyed it, your policy will pay to modernize your electrical wiring to comply with the new code.
Ordinance or law coverage doesn’t pay the costs of getting your home up to code after a renovation or routine maintenance.
Do I need ordinance or law coverage?
Costs can quickly add up if you need to rebuild your home and follow new local building codes, especially if you live in an older home that hasn’t been renovated in decades. Think about how much it could cost to overhaul your plumbing, air conditioning and electrical systems. Ordinance or law coverage ensures that you don’t have to pay these costs out of pocket.
You might also strongly consider this type of coverage if you live in a state that requires you to demolish your home if more than 50% of it is damaged. (Remember that your home insurance policy only covers the amount of your home that’s damaged. It doesn’t cover the costs associated with demolition and rebuilding.)
Take a quick look at your home insurance declaration page. Do you see ordinance or law coverage on it? Our policies come standard with ordinance or law coverage, as well as many other unique touches like enhanced rebuilding coverage and even four times more coverage for your computers and home equipment. Chat with our Hippos today to learn more.