One of the most important Property insurance coverages for your commercial building is “Ordinance or Law” coverage.
Why is it so important?
Most insurance policies are written so that you can rebuild your building exactly as it is today. This means the same materials, features, and type of construction. We call this the “Replacement Cost” coverage.
The problem arises when due to current building ordinances or laws, you can’t rebuild the building as it stands and are required to make upgrades and rebuild better than it was before. Without Ordinance or Law coverage, your policy won’t pay for changes and upgrades, leaving you with sizable out-of-pocket expenses. The most common required upgrades involve fire sprinkler systems, elevators, handicap accessibility, and electrical improvements.
What can I do?
The best proactive solution is to:
- Consider what upgrades would be required for your building.
- Get estimates on the cost of these upgrades.
- Secure Ordinance and Law coverage for that amount or greater.*
*This is specifically covered under “Part C” of the Ordinance and Law coverage. Part A protects you from loss when new building codes require that a partially damaged structure be torn down and rebuilt instead of repaired. Part B provides for the demolition cost of tearing down the partially damaged structure.
How do I know if I need Ordinance or Law coverage?
Ultimately, a contractor, architect, or possibly your municipality could help you understand what upgrades might be required if you must rebuild. Generally, the older the building, the more upgrades it will need. Naturally, a new building that was just constructed already meets current codes, but as time goes by—and codes change—there will be more discrepancies.
If major building code changes take place that affect your property, you’ll want to learn about them and understand the impact they would have on rebuilding. When that occurs you can adjust your Ordinance or Law Part C coverage accordingly.
Have you secured proper Ordinance and Law coverage?
If you’re not sure or if you don’t totally understand your coverage needs in this area, please reach out to your agent—or to me!
