Insurance coverages you THINK are boring: Ordinance or Law

When we purchase insurance, we all want to think we are completely covered. The harsh reality is: you can never be truly “fully insured”. Think about all of the Hurricane Harvey victims who found out their homeowners insurance didn’t cover flood?  Now they have lost everything. You can’t protect yourself from everything but you can educate yourself to know what to be prepared for.

Which leads us to: Ordinance or Law Coverage

If you are lucky, your homeowner’s or business owner’s policy might have an enhancement endorsement that your agent put on that gives you 5-10% Ordinance or Law coverage. Or it might not give you any. But if your home or business property is any older than the year 2000 or so, you might consider asking your agent to increase those limits if possible.

The Boring Definition:

Coverage for loss caused by enforcement of ordinances or laws regulating construction and repair of damaged buildings. Older structures that are damaged may need upgraded electrical; heating, ventilating, and air-conditioning (HVAC); and plumbing units based on city codes. Many communities have a building ordinance(s) requiring that a building that has been damaged to a specified extent (typically 50 percent) must be demolished and rebuilt in accordance with current building codes rather than simply repaired. Unendorsed, standard commercial property insurance forms do not cover the loss of the undamaged portion of the building, the cost of demolishing that undamaged portion of the building, or the increased cost of rebuilding the entire structure in accordance with current building codes. However, coverage for these loss exposures is widely available by endorsement. Standard homeowners policies include a provision granting a limited amount of building ordinance coverage; this amount can be increased by endorsement. Also referred to as building ordinance coverage. ~ as quoted by www.irmi.com on 9/15/17.

True life story about my friend Gabe

My friend Gabe and his family bought a beautiful 1955 home in small town, CT. For Connecticut, 1955 is pretty new for a home. Gabe is a craftsman, so he soon went to work turning the house into the home of his wife’s dreams. Custom bathrooms, custom kitchen, new windows, new bedroom for his daughter. He had just finished customizing his $75,000 kitchen, the paint was barely dry–when a large Oak tree fell on his house. It smashed the house right in the middle, destroying ALL of his hard hours of labor. He and his wife were very upset but what could they do? They were relieved knowing they had insurance. But when the adjustor comes out, he tells them the hard truth. “You have replacement cost on your house which would give you up to the $505,000 of coverage. However, this is a partial loss, not a total loss and when you rebuild–you have to rebuild up to code. This house is not currently up to code. You have 10% of Ordinance or law coverage, which could give you $50,000. To make the necessary repairs; this is going to cost $250,000.” Gabe learned what Ordinance or law coverage is, the hard way.

Moral of the story is: Read your insurance policy friends, read the boring insurance definitions and ask your agent questions. They will be happy to talk to you about it. Cheaper isn’t better, do you think it would have been worth paying $10 more per month to get a $250,000 payout? Yes I believe it would.