Law and Ordinance Insurance: FAQ
Why does this coverage matter to you?
This coverage may apply to you in two ways. First, it may help to cover increased costs due to past ordinance (building code) changes. Secondly, it may provide coverage to assist you with increased costs due to the proposed code changes presently under consideration by the City.
Why do many Homeowners insurance policies include this coverage in their policy?
Based upon their recent history with a wide variety of natural disasters, insurance companies discovered that many homeowners face additional costs to rebuild due to code changes that occurred between the original construction and the rebuild date. Historically, insurance policies did not cover construction improvements but needed to provide some coverage in order to provide replacement coverage. Thus, many policies now include some coverage to cover these costs. In addition, this coverage can provide additional debris removal coverage for partially damaged buildings which local ordinances require demolished due to the extent of their damage.
Where do I find this coverage in my policy?
Most Homeowners policies exclude law and ordinance in the property section exclusions. Many carriers add back a limited amount of coverage expressed as a percentage of Coverage A (which is the policy limit on your dwelling shown on your policy declarations page) in the Additional Coverage section of the property part of the policy. Some may add a separate endorsement providing this coverage.
How much coverage is provided for this protection?
The amount varies in each companies’ policies. As a general rule, many policies provide between 5-10% additional coverage calculated using Coverage A (your dwelling policy limit shown in your policy declarations) as the base amount.
When does coverage apply?
If coverage is provided by the policy, most policies agree that increased construction costs due to code changes prior to the loss are covered. Many policies do not stipulate when the ordinances were in effect as long as they are required at the time of rebuilding.
How do I know what ordinances have changed that might increase my costs of rebuilding?
Based upon our research, there is no single source to find this information except to research the building codes for the past thirty years. Colorado Springs Together has a team working to develop a list of these codes to provide to your builder and carrier to assist you in determining potential codes which may increase the costs to rebuild your home.
What should I do next to determine how this coverage might affect me?
You need to communicate with your insurance company to determine if you have the coverage and how they interpret when coverage applies. If you have this coverage, you need to ask your builder to break down their reconstruction bid to itemize the increased costs of any code changes identified.
Colorado Springs Together is an independent 501(c)(3) Non-Profit
Colorado Springs Together is a community-driven volunteer effort, and is an independent 501(c)(3) non-profit organization. The team members are distinguished citizens and business professionals in the community facilitating and coordinating a quick and effective rebuilding process for the neighborhoods devastated on June 26th by the fire. The donations received will go towards the activities required to help restore the lives and the neighborhoods affected by the fire at the same time maintaining a strong sense of community during the rebuilding process.