ordinance or law, insurance question, homeowners policy

What is ordinance or law coverage on my homeowner’s policy?

Ordinance or law is a specific coverage that applies to most homeowner’s insurance policies, but what does it mean?

This coverage applies to the situation where a covered loss occurs and the building or structure is having to be rebuilt, repaired, or demolished in accordance with the enforcement of any building code, law or ordinance that governs any building, repair, or demolition. 

One instance that set the precedence for ordinance or law coverage is the fire of ’91.  In October of 1991 a fire occurred in Oakland Hills, California,  which brought attention to the fact that nearly 83% of homeowners were underinsured.   There were many code upgrades required for new homes built in the area, which were not included on the homeowners policy.  The typical policy now provides up to 10% of coverage A (replacement cost) for such upgrades.  

Let’s say that you are the owner of a house with knob and tube wiring but after a fire at the home the local building code requires the installation of Romex with circuit breakers.  The ordinance or law coverage on your policy provides money for the upgrade in electrical service.  In the ISO forms, coverage is limited to 10% of the replacement cost of the home. 

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