No matter the age of your building, you need to be concerned about Building Ordinance Coverage. This important coverage, which is too often regarded as necessary only for older buildings that might not meet newer building codes, should be a key part of your property insurance. And you should be especially concerned about the insurance-to-value ratio because inadequate limits and uncovered costs of rebuilding can be catastrophic to your wallet!
That being said, it is true that the older your building, the more reasons to consider a building ordinance policy to protect you against any increased repair costs triggered by building codes or ordinances.
Building Ordinance coverage is broken down into three components: Demolition Coverage, Loss of Value and Increased Cost of Construction.
- Coverage for Loss to the Undamaged Portion of the Building - Your property insurance policy pays only for actual damage, so who pays for the undamaged part of your building when the city or county says it has to come down? You do, unless you have adequate limits for loss to undamaged portion of building. Our suggestion is to have your limit set at 100% of the value of your building. Coverage for loss to the undamaged portion of the building pays for the loss of value of an undamaged portion of the existing building which must be demolished and/or removed to conform with municipal ordinance, code, etc.
- Demolition Cost - Hey, someone has to pay to demolish a building, right? But oops, it's not covered on your property insurance policy. Your limit for the demolition cost should reflect the size and complexity of your building. As a starting point, ask a local contractor what it would cost to demolish the building. The demolition cost coverage pays for the cost of demolition of the undamaged portions of the building necessitated by the enforcement of building, zoning or land use ordinance or law.
- Increased Cost of Construction - If you have to rebuild, what will you have to add or upgrade to meet code? A new sprinkler system? Wheelchair-accessible bathrooms? How about an elevator? None of these items will be covered by your property insurance if they weren't part of the building to start with -they are paid for from this coverage. Determining an adequate limit for increased cost of construction is difficult, but again, a contractor might be able to give you some sound advice. Increased cost of construction coverage pays for any increased expenses incurred to replace the building with one conforming to building laws or ordinances, or to repair the damaged building so that it meets the specifications of current building laws or ordinances.
Are you a building owner? Then take the time to review your insurance policy look at your property coverage. Do you see Building Ordinance Coverage listed on your declarations page along with a premium amount? That means you have bought and paid for this added protection - but make sure it's enough. Sometimes built-in limits won't be adequate. Contact a Knowledge Broker to discuss this coverage further and see just how affordable this coverage can be.