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Your city, town, county or state may have set building codes, or standards and requirements for any property that’s under construction. The point of building codes is to keep structures, like homes, stores, offices, and schools, as safe as possible. Because of that, building codes are subject to change over time and, if you’re repairing or rebuilding your home after a covered loss, you may also be required to make significant improvements to your home to meet any new standards added since the home was first constructed.
Ordinance or law coverage is a home insurance add-on that protects you from the extra costs you incur when you’re repairing or rebuilding your home after a covered loss and must bring the property up to code. It can also cover changes to undamaged parts of your home.
Unless it’s specifically required in your state, ordinance or law coverage is optional, meaning you can choose whether or not to add it to your homeowners insurance policy. But if you live in an older home or an area with frequent building code changes, there are many benefits you can reap and expenses you can avoid by adding it.
Ordinance or law coverage is optional coverage that helps bring your home up to current building codes after a covered loss
Without this optional coverage, you may have to pay out of pocket to bring your home up to code while repairing a covered loss
You may not be required to add ordinance or law coverage to your homeowners insurance policy, but it can save you from some costly expenses, especially if you live in an older home
If local building codes have changed since your home was built and your home was damaged in a covered loss, like a fire or windstorm, you’ll need to bring your home up to code in addition to repairing the damage from the loss. Ordinance or law coverage will pay for changes you need to make to your home while rebuilding after a covered loss. If you need to tear down and replace other parts of your home in order for the entire structure to be brought up to code, it will pay for those too, even if they weren't damaged. Examples of updates your home might require due to building codes include:
Updated emergency systems
Means of egress and evacuation
Reduced open spaces
Say part of your home and your pool enclosure were damaged in a tornado. Standard homeowners insurance can reimburse the costs of damage to the structure of your home, your personal belongings, and other structures outside of your home, like your shed. But a new building code that was established after the installation of your pool enclosure and the damaged parts of your home may require you to upgrade them accordingly to meet those new standards.
If the new building code requires pool barriers to be of a certain height and yours were just below that standard before they sustained damage, you may need to replace — rather than repair — them.
To some insurance companies, this is considered an improvement and would not be covered by one of the basic six protections of a standard policy. Ordinance or law coverage is an endorsement you can add to your policy to cover the extra costs of that replacement, without it, you could end up having to pay thousands of dollars out of pocket for the upgrades.
Coverage for ordinance or law typically starts at 10% of the dwelling limit, so if your home is insured for $350,000, you may be eligible for $35,000 worth of ordinance or law protection. Depending on your insurance provider, higher or lower limits may also be available.
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Ordinance or law coverage is an endorsement, which is typically an optional coverage you can choose to add to your policy. You would not be required to have it unless it’s mandated in your state — Florida, for example, requires homeowners to carry ordinance or law coverage.
However, if you live in an older home, there are some benefits to adding ordinance or law coverage to your policy.
Living in an older home means that local building codes have likely been updated since your home was initially built. If your home sustains damage and must be renovated or repaired, you’ll need to pay to upgrade your home to your area’s new building standards.
Say you live in an older home in a coastal flood area and half your home burns down in a fire. Your standard homeowners insurance will repair and restore the damaged parts of your home up to your coverage limits. But if a new building code requires your home to be at 10 ft. elevation and it was at 6 ft. elevation before the fire occurred, the foundation of your home will need to be raised. Ordinance or law coverage can pay for that improvement, but without it, you could end up owing tens of thousands of dollars out of pocket.
There are eight different types of homeowners insurance policies for various home types and coverage needs.
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