Ordinance and Law coverage is a type of insurance coverage that can be included in a homeowner's insurance policy. Such coverage pays not only for rebuilding a destroyed home but also upgrading the home so that it will meet the current building codes. Insurance companies may sell ordinance and law coverage as a rider to a homeowner's policy.
Ordinance and law coverage may not be typically required by a community association’s governing documents. An ordinance and law coverage includes three separate types of coverage:
1. Coverage for Loss to the Undamaged Portion of the Building: In some jurisdictions, municipal ordinance or code may require that a partially damaged building be demolished. In such cases, this coverage states that if such ordinance is in place and is enforced by the local authorities, the insurance policy will treat the claim as a total loss even though the building was only partially damaged.
2. Increased Demolition Cost: Pays for the cost of demolition of the undamaged portions of the building, if it is mandated by the building, zoning, or land use ordinance or law.
3. Increased Cost of Construction: Pays for any increased expenses incurred to upgrade, repair, or replace the building with one conforming to the current building laws or ordinances.