By: Brian J. Finnerty (CIC), Area Sr. Vice President, Arthur J. Gallagher Risk Management Services
What is Ordinance or Law coverage?
This is coverage provided under a property insurance policy that if elected can provide protection to the insured for increased repair cost that can be triggered by building codes and ordinances. In many municipalities when substantial building damage occurs, those buildings must be rebuilt and rebuilt to current code. These building code updates are often not covered by the standard property policy because they are looked at as putting the insured in a better position than they were before a claim which is not the intent of insurance. The insured must rely on “Ordinance or Law” coverage to help pay to reconstruct back to current code.
The three components of this coverage are:
- Coverage A: Loss of Value to the Undamaged Portion of the Building-Can cover the cost to rebuild the undamaged portion of the insured building.
- Coverage B: Demolition coverage-covers the cost of demolition of the undamaged portions of the building in an effort to bring the building back to code.
- Coverage C: Increased Cost of Construction-This provides for the increased cost to build back to code.
Make sure to check back next Monday for the final installment of this insurance series!