What is Ordinance and Law Coverage for Property Owners?

What is Ordinance and Law Coverage for Property Owners?

April 01, 2023

Ordinance and Law Coverage for Property Owners

Ordinance and Law coverage is an essential part of property insurance policies. It is a type of coverage that provides protection for property owners in case their property needs to be repaired or rebuilt due to changes in building codes, ordinances, or laws.

Many properties are older and may not comply with current building codes and regulations making ordinance and law coverage especially important. This coverage can help property owners avoid the financial burden of having to rebuild or repair their property to comply with new laws or ordinances.

Ordinance and law coverage typically includes coverage for the increased cost of construction.  This coverage provides protection for the increased cost of construction or repair that is required by law or ordinance. For example, if a property owner needs to replace an outdated electrical system with a new one that meets current building codes, this coverage will help cover the additional costs associated with the upgrade.  For properties along the coast that must be re-built on pilings due to flooding, increasing this limit is especially imperative.

It is important to note that ordinance and law coverage is not automatically included in all homeowner’s insurance policies. Many policies include 10% of the Coverage A limit in ordinance and law coverage, but this will vary based on the ISO form the policy is written on. For example, a $400,000 Homeowners policy would have $40,000 in Ordinance and Law coverage automatically included, again depending on the policy form edition.  Options to increase Ordinance and Law coverage is usually available in increments of 25%, 50%, or 100%.

Ordinance and Law coverage can also help pay for an undamaged portion of the home. For example, a fire destroys half your home and the insurance company pays for the part that was damaged.  If the town or state comes in and requires the other half of your home be demolished, Ordinance and Law coverage would help provide coverage for the undamaged portion in this scenario. This endorsement is very important if you own an older home or a coastal home.

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