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What Is Ordinance or Law Coverage?

You buy homeowner's insurance with the expectation that it will cover the cost of repairing or rebuilding damage to your home. However, there may be a crucial gap in that coverage.

Sometimes, local building ordinances require that you do more than simply replace what was damaged. Additional work may be needed to bring the restored structure up to local building code standards.

This kind of additional work can be very expensive. The kicker is that standard homeowner policies may not include coverage for that extra work.

Ordinance or law coverage is a type of insurance that goes beyond the cost of simply replacing or repairing an existing structure. It extends to the costs involved in bringing the restored property up to current building codes.

This article will help you figure out whether you might need an ordinance or law insurance endorsement and why it's important. 

What Is Ordinance or Law Coverage?

People tend to think of homeowners insurance as a way to pay to replace damage to their home. Sometimes though, simply replacing what was damaged won't be enough to meet current building codes.

Sometimes, local building ordinances require that you do more than simply replace what was damaged.

Ordinance or law coverage is a type of addition to a standard homeowner's insurance policy. It covers the extra cost of bringing a property in compliance with local ordinances if simply replacing the previous structure would not meet today's building code requirements.

Do I Need Ordinance or Law Coverage?

There may be situations in which any homeowner might need the added protection of ordinance or law coverage. For instance, if you live in an older home with outdated electrical, plumbing or structural elements you may want to add an ordinance or law endorsement to your homeowners insurance policy.

How Does Ordinance and Law Coverage Work?

Homeowner's insurance is typically based on the notion of replacing damaged property with what was there before. Ordinance or law coverage goes beyond that. It covers additional costs that might be necessary to bring the restored property up to current building codes. Home insurance will not cover the cost for this work, even though it may be required.

Ordinance or law coverage is an endorsement to a standard homeowners policy.

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What Types of Coverage Fall Under Ordinance or Law Insurance?

Ordinance or law coverage is common in commercial real estate, but it is often overlooked in residential properties. Yet, a look at some of the things ordinance and law insurance covers helps explain why it may be important to some homeowners.

Ordinance or law insurance covers:

  1. The cost of improvements to bring a damaged building up to code

  2. The cost of rebuilding the undamaged portion of a structure

  3. Demolition costs to bring down a partially-damaged structure

  4. The cost of rebuilding a foundation and underground infrastructure

1. The cost of improvements to bring a damaged building up to code

Modern building codes often require more advanced electrical systems, plumbing, fire safety and materials.

If you live in a house that was built before these standards were updated, your insurance may only cover the cost of replacing what was already there if you file a claim. However, local ordinances may require upgrades that meet today's standards. Ordinance or law insurance would cover this additional cost.

2. The cost of rebuilding the undamaged portion of a structure

Let's say half your home is destroyed by fire. Most likely, your homeowner's insurance would cover that half of your home. But there may still be a problem.

For safety reasons, local ordinances often require that an entire structure be rebuilt if a substantial portion of a building is damaged.

An ordinary homeowner's policy may not cover the cost of rebuilding the undamaged portion of the home after the fire. Ordinance or law coverage would.

3. Demolition costs to bring down a partially-damaged structure

If a certain portion of your home is damaged, local building ordinances may require you to knock the whole thing down and start over.

Demolition costs money. In fact, demolition and debris removal is a very costly business. A standard homeowner's policy wouldn't cover this, but ordinance and law coverage would.

4. The cost of rebuilding a foundation and underground infrastructure

Foundations, underground pipes, drains and other infrastructure below your home often aren't damaged by fires and other disasters. For this reason, they tend to be excluded in homeowner's insurance policies.

The cruel twist is that your local building code may prohibit rebuilding on an existing foundation. So, even though it's not covered by your homeowner's insurance, you may have to remove that foundation and start over. Ordinance and law coverage may pay for additional, mandated construction.

How Do I Add Building Ordinance and Law Coverage to My Existing Policy?

You could talk to your current insurance agent about getting building ordinance and law coverage added to your existing policy as an endorsement.

However, any new coverage is almost certain to cost you more money. It's always best to get competing quotes for homeowners insurance with the additional coverage. Instead of paying more, you may end up saving some money.

Foundations, underground pipes, drains and other infrastructure below your home may be covered by ordinance or law coverage.

Building Ordinance or Law Coverage: FAQs

What type of home is likely to need building ordinance or law coverage?

An older home that has not had substantial mechanical renovations in recent years is most likely to be out of step with current building codes. Thus, repairing damage to such a home is more likely to involve upgrades that go beyond simply replacing what was there before.

Why would I need coverage for an undamaged portion of my home?

When a disaster has damaged part of the home, it can be difficult to tell the extent to which it may have affected the remainder of the structure. For that reason, building ordinances sometimes call for rebuilding the entire home if a substantial part of it has been damaged. However, your insurance coverage may only cover the part that was damaged, and not the other part that will need to be demolished.

Should I just ask my insurance agent to add this coverage to my current homeowners policy?

If your agent is knowledgeable about local building ordinances and construction specifications, that might be a worthwhile place to start. However, there's no reason to limit yourself to considering only your current insurance carrier when another provider might be able to save you money on ordinance or law coverage plus your existing coverage as well.

Get Cost-Effective Building Ordinance or Law Coverage

To make sure your investment in your home is fully protected, ordinance or law coverage may be a necessary endorsement to add to a home insurance policy. To find out how much it would cost to have the peace of mind of obtaining this coverage, just enter some basic information below to start receiving home insurance quotes with an ordinance or law endorsement.

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