What Is Ordinance or Law Coverage?
A breakdown of what ordinance or law coverage is and why it's important
Written by
Christine Lacagnina has written thousands of insurance-based articles for TrustedChoice.com by authoring consumable, understandable content.
Reviewed by
Paul Martin is the Director of Education and Development for Myron Steves, one of the largest, most respected insurance wholesalers in the southern U.S.
As a homeowner, do you know what happens when your city decides to pass a new ordinance, forcing you to make mandatory upgrades to your property? Having to comply with new ordinances can be stressful, not to mention extremely costly, without the proper coverage.
The good news is that many homeowners insurance policies come with at least some ordinance or law coverage built into them. An independent insurance agent can help you get set up with the right homeowners insurance for your needs. But first, let’s take a closer look at ordinance or law coverage, how much you might need, and why.
What Is Ordinance or Law Coverage and How Does It Work?
In a nutshell, ordinance or law coverage is an aspect of insurance that provides financial assistance if a building must be brought up to state codes. This can happen if an extreme incident damages a building or if a city or state passes new legislation requiring mandatory upgrades for homes to adhere to current codes.
New ordinances may require certain aspects of a building to be repaired or replaced, or they may require the entire building to be demolished and rebuilt from the ground up. Local codes vary depending on where you live, and they change all the time. Mandatory changes required by new ordinances range from simple and cheap to complex and costly, which is why having coverage for these changes can be critical.
Do I Need Ordinance or Law Coverage?
To prevent having to pay out of pocket for mandatory upgrades to your home or to cover repairs necessary after various incidents, yes, you need ordinance or law coverage. Several scenarios could lead to your city calling for mandatory improvements on a home. Here's a look at a few of the most common.
Scenarios when ordinance or law coverage is necessary:
- Updated weatherproofing codes: In areas prone to windstorms, new ordinances may be passed that require upgrades to home features like storm windows, shutters, or roofs. In areas prone to flooding, new local ordinances may require homes to be demolished and rebuilt on elevated foundations such as stilts.
- Updated fire safety codes: New local codes may dictate stricter fire safety measures. This could involve adding features like fire extinguishers or something more complicated like installing sprinkler systems or fire escapes.
- Updated handicapped compliance codes: New city legislation may require you to add handicapped-compliant features to your building, such as ramps or lowered light switches.
- Updated plumbing or wiring codes: Changes in local ordinances may require you to update or upgrade features in your home for safety reasons, such as wiring or plumbing systems.
It’s wise to become familiar with the specifics of your homeowners insurance policy and how far your ordinance or law coverage extends. That way, should your city suddenly demand upgrades to your home, you’ll know if you’re covered and how much.
Save on Home Insurance
Our independent agents shop around to find you the best coverage.
Types of Ordinance or Law Coverage
The property coverage aspect included in standard homeowners insurance policies provides replacement value coverage for certain things, but not nearly to the extent that ordinance or law coverage does. Here are a few common areas in which homeowners policies without ordinance or law coverage can come up short.
Ordinance or law coverage makes up for gaps in home insurance in the following areas:
- The cost difference for upgraded features: A standard policy might not provide the funds to make up the difference in cost between the old feature and its upgrade. If you were required to install new storm windows, standard home insurance policies would cover replacement costs equivalent to the value of your old windows, and you’d have to pay the difference for the new ones. But ordinance or law coverage does this automatically.
- The value of the undamaged portion of demolished buildings: Let’s say a bad fire causes damage to about 60% of a building, and now the whole thing needs to be demolished and rebuilt. Without ordinance or law coverage, the undamaged 40% of that building wouldn't be paid for. Ordinance or law coverage also pays for the cleanup of debris or other messes left by the undamaged portion.
- The cost of bringing undamaged portions up to code: Partially damaged buildings that are required to be brought up to new local codes are fully covered under ordinance or law coverage. Standard policies would only provide coverage for the damaged portion.
- The replacement/upgrade costs for foundations: The foundations of buildings, including underground pipes and drains, etc., typically aren’t covered by standard policies. Ordinance or law coverage pays for replacement costs for all aspects of the building, including its foundation and related features.
Ordinance or law coverage is important to fill in the gaps left behind by standard home insurance policies lacking in full repair/replacement/upgrade protections. New local ordinances can be passed at any time, so having full coverage is well worth it.
Does My Homeowners Insurance Policy Cover Mandatory Upgrades?
Most likely, yes, but to an extent. Typically, most homeowners policies have some built-in ordinance or law coverage, usually with a $10,000 limit. The thing you’ll have to consider is if this limit is high enough. You can always add more coverage to your policy, and you might especially want to if you live in an area at high risk for storm damage.
How Much Does Ordinance or Law Coverage Cost?
Adding more ordinance or law coverage to your homeowners policy usually isn’t very expensive. Upgrading your coverage by $40,000 might only affect your annual premium by an average of $66.
Considering how expensive some mandatory upgrades can get, this move might really make sense for you. Talk with your independent insurance agent to weigh your options for adding coverage to your home insurance policy.
Save on Home Insurance
Our independent agents shop around to find you the best coverage.
Compare Home Insurance and Ordinance or Law Coverage Quotes with an Independent Insurance Agent
We all know how valuable your time is, so why spend it doing the hard work yourself? From homeowners insurance policies to additional ordinance or law coverage, independent insurance agents will help you determine what type of coverage makes the most sense.
They’ll help you find the right coverage at the right price. And they’re not just there at the beginning, either. If disaster strikes, your agent will be there to help walk you through the claims process and make sure you are getting the benefits you’re entitled to. Now that’s thinking ahead.
https://www.irmi.com/articles/expert-commentary/explain-ordinance-or-law-coverage-to-avoid-e-o-claims