Ordinance and Law Coverage in Home Insurance - YA

town homes on sloped road
Ordinance and Law Coverage in Home Insurance

Ordinance and Law coverage is a common limit in your home insurance policy that is often set to 0%, 10%, 25%, or even 50% of your Coverage A. This is a safe guard your insurance carrier puts in place so they are not on the hook for repairs/updates driven solely by building codes set in your area.

If your city changes building codes and your house is no longer compliant, even if a covered peril damages your house, additional rebuild/repair costs associated with building code laws may be capped. The cap is usually set by your Ordinance and Law Coverage amount, not your entire Coverage A. 

An Example:

You have an HO3 home insurance policy with $300,000 in Coverage A

You buy a fixer upper townhome that was built in the early 1900s. After years of renovation, it becomes quite cozy. However, 20 years later, a windy storm blows down a tree that damages your roof and exposes the roof deck. When the roofer comes out to give an estimate on the repair, he finds the townhome structure is no longer compliant will building codes because of a poorly framed roof deck. He says the roof will cost $12,000 to replace, but the update to your roof deck is structural, and will cost $80,000. You call your insurance company to see if this update is covered and they tell you that your policy only has 10% ordinance and law coverage, which is $30,000 based on your $300,000 in Coverage A. You are $50,000 short of the $80,000 roof deck update required to get to code! 

oh my gosh GIF

While a tricky sub-clause in home insurance, this can be relevant as your county passes new building codes and especially if you have an older vintage home that is not up to building code.

At your service,
Young Alfred