What is Ordinance & Law Coverage?
An ordinance is a rule made by a municipal authority, and this can sometimes have an effect on how a claim might be handled with your home or property insurance policy. For example, buildings in Rockford which incur physical losses of 60% or more must be completely torn down. If a fire destroys 60% of your home, but 40% was untouched, the city would require you to demolish the remaining 40% before reconstruction. A typical insurance company, however, would not pay for the additional cost of tearing down the remaining portion of the home and replacing it. This is where building ordinance coverage comes in.
What different aspects make up Building Ordinance Coverage?
In short, there are three segments that make up building ordinance coverage: the Undamaged Portion (Coverage A), the Demolition (Coverage B), and the Increased Cost of Construction (Coverage C).
Continuing with the example from above, Coverage A would pay for the portion of your home that is not damaged to be replaced. Without Coverage A, your insurance likely would not pay for the undamaged portion, which was torn down due to the ordinance, to be reconstructed with the rest of the home.
Coverage B covers the actual demolition of this undamaged portion of the building. Your insurance will cover demolition and debris removal of the damaged portion, but not the part of the home that remained in tact. National estimates for tearing down a home range anywhere from $4,000 to $14,000 — a cost you are not going to want to pay out of pocket.
Coverage C pays for the updates of your new home to current regulatory codes. If you had an older home, chances are that there are new requirements for the construction of homes which may incur costs above the coverage on your policy. Building Ordinance coverage would pay for these additional costs.
How is this coverage added to my homeowners policy?
In some situations, your policy may already have building ordinance coverage built into it. Some carries, such as Westfield and West Bend, automatically include a minimum of 10% of your home’s replacement cost as building ordinance coverage on the policy. If your home is covered for $300,000, then you would have $30,000 of building ordinance coverage. Other carriers, however, do not automatically include this type of coverage and it must be added as an endorsement. Generally, it is offered in increments as a percentage of your home’s replacement cost; in many cases, 10%, 20%, 50%, or 100%. However, this depends on the carrier. It is not always a cheap coverage to add, but may be worth the money if you have a loss that might be affected by an ordinance or local law.
Eckburg Insurance Group is the largest home and auto insurance provider in northern Illinois. We can cover all your home, auto, business, and life insurance needs. Our dedicated staff, made up almost entirely of men and women who were raised in our community, works tirelessly everyday to keep you protected. Call us today at (815) 877-4100 or click here for a quote!
