In the third and final part of our “Diving Deep: Building Ordinance & Law” series, I’d like to focus our attention on Coverage C of this form – Increased Cost of Construction. As a reminder, Building Ordinance and Law Coverage is an option for property insurance. A standard property insurance policy replaces the damaged property with the same or similar property. If a structure was built a long time ago, building a similar structure as a replacement may not satisfy new local regulations. Building a new structure that meets modern environmental standards, and standards for protection against disasters such as hurricanes, will cost additional money, which Building Ordinance or Law Coverage provides.
Coverage C specifically references the additional cost of upgrading your new property to current building codes. Take our running example, where a fire destroys ¾ of your building, leaving ¼ undamaged. Where Coverage A pays for the cost to rebuild the damaged portion of your building and Coverage B pays for the need to demolish and remove the undamaged portion of your building, there is still the need to upgrade your newly built structure to today’s codes. This is where Coverage C kicks in. It allows you to finalize the process of bringing your building to the point of operation.
As discussed last week, the limit you choose here is of paramount importance. We don’t want to have millions of dollars in unanticipated Building Ordinance & Law coverage. The standard recommendation is 10% of your building limit, but depending on the circumstances around your property, that may or may not be enough. Connect with your insurance consultant to see where you fall and how much coverage is needed. You don’t want to be another cautionary tale!
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Written by Robbie Korth
If you have any questions, please feel free to contact Robbie Korth at email@example.com