Ordinance Coverage

Let's say you own an older building, and it's partially damaged due to extreme weather, fire, or some other catastrophe customarily covered by property insurance. But when you try to rebuild damaged parts of the building, you find out that you're not completely covered for the costs of rebuilding.

It could be because your building was built prior to modern building codes. Every municipality sets its own city ordinances, and those are updated over time as safer products or techniques become available. So if your property was built in 1960, and you sustain damage today, your regular insurance might not pay for all your losses.

That's when ordinance insurance, also known as law insurance, becomes necessary. Here are three different examples of when ordinance coverage could apply.

  1. If only a portion of your older building is damaged, you may still be required to demolish the entire building if it's not currently up to code. Standard property coverage will only replace the portion of your building that was damaged, so you'll be financially responsible for the part that wasn't – even though you're being forced to rebuild it. Ordinance coverage could help pay for the demolition of the property, remove debris, and rebuild costs. 
  2. If your building is partially damaged, the standard insurance coverage will likely only pay for the actual damages and not any improvements you want to make as part of your rebuild. For example, suppose you're going to replace an old heating system to help modernize your building or install features to bring your property up to ADA standards. In that case, these efforts are likely not covered by standard property insurance but could be with ordinance coverage.
  3. Standard insurance won't cover costs due to rebuilding delays caused by code compliance issues. If you know your building isn't up to code, you might consider the expense these delays could cost if you're forced to repair damage to your property. Ordinance insurance could help cover the expenses of ceased operations and possible compensation for lost income.

Could you benefit from ordinance coverage?

While ordinance or law coverage can benefit owners of older properties, acquiring such coverage does require a rider or endorsement to your standard policy, and it will come at an extra cost. Still, paying a little extra now could help you in the long run. It's important to discuss your concerns and questions with your insurance agent. Ordinance coverage is specific to locations and circumstances. Ensure you understand what's available for your situation, how much it will cost, and if it makes sense for you.

We'd be happy to help you with your property insurance questions. Call or contact Sea Mountain Insurance today for more information.