What does ordinance insurance cover?
If your home is older, there is a good chance that many of its systems need to be upgraded to meet local building codes. That is where ordinance insurance comes in.
HVAC (heating, ventilation, and air conditioning) systems are one area that often needs to be brought up to code in older homes. Electrical and plumbing systems commonly need updates as well.
Often, if a home is damaged to the extent that it is more than 50% destroyed, local ordinances require that the structure be torn down and rebuilt. In that event, ordinance or law insurance coverage can help to reduce or eliminate out-of-pocket expenses for the homeowner.
What's included under ordinance or law coverage?
While each homeowners' insurance policy is different, there are some common areas where this form of coverage kicks in. Ordinance law typically covers:
- The value of the undamaged portion of a demolished building: If a fire destroys roughly 60% of your home it will need to be demolished according to local ordinances. Ordinance insurance pays you for the 40% of the building that wasn't damaged and often covers the cost of cleaning up the mess and debris from the undamaged section.
- The upgrade or replacement cost for the foundation of your home: This includes the underground drains, pipes and other fixtures of the home. Standard policies don't typically cover the foundation of a home but ordinance insurance pays for the replacement of all aspects of the building, including the foundation and all its related features.
- The cost of bringing undamaged portions up to code: If your home isn't damaged enough to require complete removal, those areas that are damaged will need to be brought up to code. Standard policies only cover the cost of bringing the damaged area up to code, while ordinance insurance covers the rest.
The benefit of ordinance or law insurance coverage to homeowners cannot be overstated. It's essential to fill in the gaps standard policies may leave. New laws and ordinances are passed all the time, and the peace of mind this kind of full coverage provides is worth the extra cost.