Ordinance & Law Home Insurance for Cape Cod Home Buyers
Ordinance & Law coverage is available on both Commercial Property policies as well as via endorsement on Homeowners policies. For the purpose of this discussion I’ll focus on the Commercial form. Briefly, Ordinance & Law coverage is available via endorsement from most carriers and is broken down into three coverage segments:
Coverage A- Undamaged Portion- Should your building be partially damaged by a covered cause of loss (i.e. Fire or Tornado), the local Building Department or Fire Marshal might require that you demolish the undamaged portion of the structure and reconstruct an entire new building. Without Ordinance & Law coverage on your policy, the insurance company may not pay for the part of the building that wasn’t originally damaged. Coverage A closes that gap.
Coverage B- Demolition- Continuing from the loss scenario above, Coverage B pays for the cost to actually demolish the remaining portion of the building left standing after the original cause of loss. Again, without Ordinance & Law on your policy, you’d likely be left “self insuring” this expense.
Coverage C- Increased Cost of Construction- If the building code has changed since the time your building was originally constructed, Coverage C pays for these mandatory building enhancements. Without this coverage, the insurance company would only pay to rebuild what was originally there. Common examples which might apply include hurricane strapping, fire sprinkler systems, ADA-compliant hardware or elevators.
Because Ordinance & Law coverage can prove so valuable, it isn’t always cheap. Coverage A is usually written up to the building limit on the policy. Shared or separate sub-limits are typically chosen for Coverages B&C (i.e. $50,000 combined or $50,000 for B and $50,000 for C). All that being said, every client’s exposure is different so be sure to ask your agent to discuss your specific exposure and the cost associated with closing this gap.
Part A provides this protection based on the coverage limit you select. Demolition costs. While property insurance covers debris removal for a portion of property damaged by a covered peril, it doesn't cover demolition expenses for an undamaged portion of a building that has to be removed.
Coverage for loss caused by enforcement of ordinances or laws regulating construction and repair of damaged buildings. Older structures that are damaged may need upgraded electrical; heating, ventilating, and air-conditioning (HVAC); and plumbing units based on city codes.
Many communities have a building ordinance(s) requiring that a building that has been damaged to a specified extent (typically 50 percent) must be demolished and rebuilt in accordance with current building codes rather than simply repaired. Unendorsed, standard commercial property insurance forms do not cover the loss of the undamaged portion of the building, the cost of demolishing that undamaged portion of the building, or the increased cost of rebuilding the entire structure in accordance with current building codes. However, coverage for these loss exposures is widely available by endorsement. Standard homeowners policies include a provision granting a limited amount of building ordinance coverage; this amount can be increased by endorsement. Also referred to as building ordinance coverage.
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