Law and Ordinance provides coverage on an insurance policy when a structure, that is damaged by a cause of loss that is covered on the policy, requires additional updates to undamaged portions of the structure to bring it up-to-date with new building codes that have been enacted in a municipality since its original construction or last updates occurred.
Most buildings that are constructed prior to building code revisions are “grandfathered” and the municipality may not make the property owner update the structure until other zoning and permitting is applied for. This may occur with new additions to the structure or remodeling projects.
When a building incurs damage, and permitting must be acquired for reconstruction or repairs, the municipality may require updates to other portions of the structure to bring it up-to-code. This is where the Ordinance and Law Coverage within an insurance policy comes into play.
Ordinance and Law Coverage is often included on the Property portion of an insurance policy. However, the amount of coverage is usually restricted to a sublimit, which means that it is less than the total amount of property coverage limits for the buildings insured on the policy.
Insurance companies will typically offer Law and Ordinance Coverage at a percentage of the insured value of the insured structure. Because it is included in most policies, this coverage often gets overlooked by policyholders. However, it can be a very important coverage to have and purchasing additional limits of insurance is warranted in some cases.