WHAT IS ORDINANCE OR LAW?

Remember earlier when I warned you about potential government agencies changing regulations within building codes? This is where Ordinance or Law coverage comes into play.    This coverage is supplied in three parts; Coverages A, B and C. To understand how these coverages work together let’s use an example like when a major calamity strikes such as a large fire. Since Fire departments respond quickly usually the entire building is not lost. This leaves a remaining portion of the building standing.

COVERAGE A: Loss to the Undamaged Portion of the Building.

In the event that the fire mentioned in our example above the building, now uninhabitable, is ruled by a regulatory agency as needing to be torn down. Since insurance normally doesn’t cover what isn’t lost, special coverage is included for the intentional tear down of the remaining portion. But this now leaves you with a bill for the demolition crew and clean up which is why the insurers include…

COVERAGE B: Demolition Cost

Knowing that you’d be left with a very large “clean up” bill the insurers have included Coverage B to pick up that tab. Demolition of the undamaged portion is a separate cost then what it would be to repair or rebuild the building so in order to ensure that you’re insured there are both Coverages A & B, what about C?

COVERAGE C: Increased Cost of Construction

Back to our pals at the regulatory agencies, they often find that we need to change what we use or include to make our buildings safer places to live. As time and technology move on new discoveries are made as to what is the “best” way to build a safe building. When adopted into law most people will not need to be concerned. However, when a fire like our example above, occurs and the entire building must be rebuilt your builders will need to follow the law. This could mean adding sprinklers, an elevator or even “green” compliant windows or climate control systems. Any items that were not originally part of the building would otherwise not be covered without Coverage C.

***Caution this limit is often left at default or very low. This coverage is generally not terribly expensive and can literally save you millions if you ever need to use it  When working with a contractor recently he explained that $10,000 per unit is a rough cost of just sprinkler installation. This means a 100 unit association would need a million dollars in coverage for that alone. ***