Also known as Building Ordinance Coverage, Law and Ordinance Coverage is a type of property insurance that covers a unique gap in property insurance coverage. If a building mandates certain codes, you must adhere to these codes in repairing, constructing, or replacing a building. This may cost more than you expected, and these updates won’t always be covered under commercial property insurance. That’s where Law and Ordinance coverage steps in.
What Does Law and Ordinance Coverage Cover?
Law and Ordinance coverage covers losses incurred from building code enforcement when said building is damaged by fire or other covered perils. There are three parts to Law and Ordinance Coverage.
- Coverage A. Loss of Undamaged Area. If only one part of the building is damaged but a code orders demolition of the entire building, Coverage A covers the loss of the undamaged area that’s demolished. You can insure the building at 100% replacement cost value to ensure that you’re covered.
- Coverage B. Demolition. Along with Coverage A, Coverage B covers the cost of demolition and clean-up of the undamaged area.
- Coverage C: Higher Cost of Construction. Codes may require updates or repairs to a certain standard. Coverage C covers the cost of reconstructing, repairing or remodeling both damaged and undamaged areas of the building.
- Longer Period of Restoration. If your business is unable to run during a long period of restoration, this coverage will pay for losses that would occur as a result.
What Does Law and Ordinance Coverage Not Cover?
As with any policy, there are limits to Law and Ordinance coverage. Only listed perils are covered and anything beyond that may fall to you to pay. Covered perils include fire and wind damage. While law and ordinance coverage is often used for businesses and contractors, you can also buy it for your house. Though your homeowners’ policy covers a lot of the same perils, it typically won’t cover expenses that come with renovating your home to meet certain code requirements set by the city, state or other organization. Law and ordinance coverage is especially important for older homes that may have a harder time keeping up to date on certain building codes.
Speak with an insurance agent about insuring a building or home with law and ordinance coverage. While it may seem unlikely, you don’t want to be caught paying a ton of money out of pocket for unexpected renovations or repairs.