Keep posted, keep informed.
Habitational property is a large class of property that would be covered under a Commercial Package Policy or Businessowners Package. From coverage for single-family homes to multi-family units or condominiums to hotels, motels and even student housing or senior living facilities, there are a lot of areas in which agents can help protect building owners. A Commercial Package Policy that covers habitational properties can have many facets, one of which is ordinance or law coverage. Often overlooked, this type of coverage is specifically for loss that is caused by the enforcement of laws or ordinances regulating the construction and repair of damaged buildings.
Standard property insurance programs will provide coverage for the compensation of returning the actual physical structure of a building to the condition it was prior to the loss from a covered peril. What is not covered under standard property insurance, and is typically specifically excluded, is the increased cost of rebuilding, repair or remodeling that is created when adhering to current local, state and federal building codes.
What do you need to know about ordinance or law coverage?
- Damage to older buildings (by natural disaster or emergency) may require additional upgrades to bring the building to code that may not be covered by the basic insurance policy. Ordinance or law coverage is specifically built to fill the gaps in coverage for these types of repairs.
- Some community ordinances require that a building that has been damaged to a certain degree (typically 50%) must be completely demolished and rebuilt to code, rather than just repaired. Ordinance or law coverage can help here as well.
- Demolition comes at a cost – and if that demolition is due to the undamaged portion of the building being condemned, that would not be covered by the basic insurance policy. If the undamaged portion of the building is condemned or deemed unusable because of damage to other areas, it would be a total loss of the building. Ordinance or law coverage would cover this type of loss, even though there was no actual damage done to that portion of the building.
It’s also important to know that there are four coverages that the ordinance or law coverage endorsement is built to cover. Unless you add this endorsement to the commercial property policy, they are ALL excluded:
- Coverage A – Loss to the Undamaged Portion of the Building
- Coverage B – Demolition Cost Coverage
- Coverage C – increased Cost of Construction Coverage
- Post-Loss Ordinance or Law Option – allowing for compliance with changes in laws or ordinances occurring between the time of loss and the beginning of construction
Ordinance or law coverage is a necessary protection to ensure that partial or total damage to a building is properly covered. It is important to become familiar with the different options for ordinance or law coverage and what they provide, so that your customers are protected
About Mavon Insurance
At Mavon Insurance, we pride ourselves on our unique approach to insurance. We focus on integrity, communication, professionalism, respect and gratitude to help our clients succeed and place business in specialized markets. For more information about our products, or to become an agent, contact us today at (855)-248-1480.