To understand the need for Ordinance and Law coverage we first need to look at the insurance agreement.
The important parts to consider include:
- Coverage is provided for direct physical lose to tangible property.
- And two the loss settlement provision will provide reimbursement for like kind and quality
So if your building is struck by lighting and catches fire - there is direct physical loss to property - and policy will respond replacing what was damaged. But what about your local building code requirements? Does your building meet all the current cores?
Some considerations that may need to be made include:
- Fire Suppression Sprinkler System
- ADA compliant features which can include elevators, handicap bathrooms and ramps
- And with our green energy push many improvements in insulation or R-values requirements have been changed.
These improvements can add over 25% to the reconstruction cost of a building. And, many communities have a building codes requiring that a building that has been damaged to a specified extent (typically 50 percent) must be completely demolished and rebuilt in accordance with the current codes.
- An unendorsed property insurance policy will not pay to rebuild the portion of your building that was not damaged.
- It also will not pay the cost to demolish that undamaged portion of the building.
So what is needed? A Building Ordinance and Law Coverage endorsement.
There are three basic parts.
- Coverage for the undamaged portion of the building that needs to be torn down
- Increase cost of construction limit for the required building improvements
- Demolition cost reimbursement for the portion of your building being torn down - that was not damaged.
There are other considerations that need to be made and I’m available should you have any questions.