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Ordinance or Law Coverage

Ordinance or law coverage is an add-on insurance coverage for homeowners insurance. It covers the cost of re-building the home to local building code requirements after it has been damaged or destroyed by a covered event.

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When tragedy hits your home, and it needs to be repaired or reconstructed, there are a lot of different aspects to consider. One such aspect is the current laws and ordinances of your municipality. After a peril, a home can be reconstructed, but it must be up to code. This is where ordinance or law coverage comes in.

Law or Ordinance coverage helps cover the costs to reconstruct or repair a home and bring it up to code after it has been damaged by a covered peril. So if your home suffers from a fire and needs to be rebuilt, the increased cost to build it to code per city or town ordinance or law will be covered by this insurance.

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This type of coverage is not automatically included in your standard home insurance policy. It is usually considered an additional endorsement that must be purchased separately. Keep reading to learn more about this coverage and how it works.

How ordinance or law coverage works

Every state and municipality within the state has its own set of rules and regulations. These rules are often referred to as codes, ordinances, bylaws, or laws. These rules govern how a citizen can build homes, use land, and partake in other activities within the municipality.

These laws are in place to help prevent risk, injury, and harm. Essentially, they are there to make sure everyone is safe and is guaranteed minimum quality. This is especially true when it comes to constructing homes and businesses.

Over time, technology changes and improves, which can result in changes to these laws and ordinances. So, if you have a home that was built under one set of rules and it suffers a few years down the road, the laws may not be the same. Although they are not the same, many municipalities require you to reconstruct a home to meet current standards and rules.

When this occurs, it is good to have ordinance or law coverage. This will cover the additional cost of the equipment being replaced that needs to come up to code. So, say, for example, you had a home with a fire alarm system that was not wired in, and the new code says you need a wired fire alarm system. This coverage will cover the additional cost of this repair to bring it up to code.

This isn’t the only type of scenario this coverage will help with. Other common scenarios can include but are not limited to:

  • New HVAC system requirements
  • New minimum insulation R-value requirements
  • New fire alarm requirements
  • Additional open space requirements
  • Electrical and plumbing update requirements
  • Means of egress requirements
  • ADA compliance

So rest assured, if you have this endorsement and your house is badly damaged and needs major construction, this policy will kick in and ensure you have enough coverage to comply with local code and law requirements.

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What does law or ordinance coverage cover?

While law or ordinance coverage is extremely helpful, it will not cover the full reconstruction of a building. Instead, it works in tandem with the standard insurance policy to cover costs that are exceeded by its minimums. Some common examples that could be covered are:

  • Remodeling, removing, replacing. If part of your home was not damaged but still needs to undergo renovations, your policy would cover these costs if the ordinance or law coverage add-on is selected.
  • Government required demolition. If your local government requires that the portion of the building that was damaged in a covered peril be demoed, this type of insurance will cover the cost of the demolition.
  • Demo or reconstruction of a non-damaged portion of the home. If your home was partially destroyed but needs to be completely razed or demoed in order to be reconstructed appropriately, this type of policy will cover the cost up to its maximum.

This comprehensive insurance removes the burden of unexpected costs in a large reconstruction or renovation project after a covered event occurs. Even the part of the home that was not considered a loss may need additional work in order for the building as a whole to come into compliance with local rules and regulations.

How much ordinance and law coverage should I have?

When determining the amount of ordinance and law coverage you should purchase, you need to think about a few different points. First, think about the age of your home and how it was built. Then, think about the location of your home. 

In most states, this type of coverage is usually provided at 10% of the dwelling coverage limit. But for other states, which are more likely to be impacted by storms and natural disasters, the coverage can soar higher to 25%-50%. 

For example, if you have coverage for your home that is $200,000 and you have ordinance or law coverage at the typical 10%, you will then receive $20,000 to take care of the costs of additional upgrades that need to occur due to local law or ordinance changes. The costs that qualify would not impact your dwelling coverage limit when assessed.

When buying his insurance, also keep in mind other costs that will be associated with a rebuild. Demolition costs are very expensive and often can eat up a 10% coverage. Increasing this coverage will help avoid running short on funds for basic requirements under the laws.

Deductible for ordinance or law coverage

All insurance comes with a cost, which is often referred to as a deductible. This is the amount a homeowner needs to pay before receiving a check for their claim. Some endorsements require homeowners to pay separate deductibles from their standard policy. In the case of law or ordinance coverage, this is not true.

Ordinance or law coverage is often considered an add-on to your standard insurance policy. It typically does not have its own deductible but instead falls under the standard deductible the homeowner or policyholder needs to pay when filing for a claim. In most cases, the standard deductible for homeowners is between $1,000 and $3,000. 

The homeowner should expect to see a check for the total claim, less the deductible amount, which is supposed to be covered out of pocket by the policyholder.

Having this add-on should not increase your deductible, but it may increase the total cost of your overall policy.

Examples of the ordinance or law coverage

Ordinance or law coverage can help a homeowner out in many different scenarios. Below we have highlighted some common examples to help you better understand how beneficial this coverage can be.

  • Fallen Object. Say a tree falls onto your attached garage. This peril is covered by a standard insurance policy. In most cases, if the damage is significant, this destroyed structure would need to be demolished. The ordinance or law coverage add-on would cover the cost of the demo for this damaged part of the home.
  • Fire. If a house suffers from a fire, it can either be considered a partial or total loss. In either circumstance, ordinance or law coverage can be very useful. In most cases, a lot of electrical work will need to be done. Electrical standards are often changing and you may need to comply with the new requirements. Law or ordinance coverage will cover the difference between the old standards and the new standards.
  • Water Damage. If your home suffers from a burst pipe and the water causes extreme damage to your electrical wiring, this type of coverage will kick in to help cover the cost of bringing any wiring up to code.
  • Roof Collapse. If a roof collapses, it can cause structural damage to other supporting beams and walls within the home. The local government may require a demo to occur for safety. If this occurs, this would be covered under this add-on.
  • Pool Enclosure. If an intense windstorm strikes and destroys part of the fencing around your pool is destroyed, it will need to be rebuilt. If your local ordinance requires more extreme support, such as hurricane-proof enclosures, the ordinance or law coverage will cover the difference.

In all of these cases, a government rule or regulation requires action in some sort of manner to come into compliance. When this occurs, ordinance or law coverage will help cover the cost to get these upgrades and comply. Without it, you would need to pay out of pocket.

Secure your investment

Laws are constantly changing, and it is important to keep an eye on them. When a building code is updated or changed, it could effect you in the long run if something happens to your home. Many municipalities require buildings to be reconstructed to current standards, this insurance will help prevent shocking costs from being absorbed by the homeowner.

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Katelyn is a freelance copy editor and writer based in Massachusetts. She holds Bachelor's Degrees in Business Administration and Political Science, both from Fitchburg State University, as well as a Master's Degree in Public Administration from UMass Amherst. In her free time, Katelyn enjoys reading, traveling, and spending time with her family.
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