Building Ordinance Insurance is important coverage for building owners. We hope to shed some light on this topic and coverage through the entry below and through our video on Building Ordinance.
Building Ordinance Coverage provides insurance to update, modernize and bring older structures up to current building codes and laws. Every year, new Building Codes are passed and put into Law and every new structure or remodeled structure is required to meet this new requirements. Older buildings do not have to meet this new requirements, they are Grandfathered, they are not required to bring the structure up to code at that point. Will become a concern is if older building is remodeled or if there is a large fire or other range loss. When there is sizable loss usually in the range of 70% or more, then, the Local Building Department in your city or in your town can require the building to be brought up to code. "Up To Code" means that all the changes that have been made over the years, now have to be made on the building and they have to be paid for. This number can be as high as 30% to 40% of the building value.
There are many forms of Building Ordinance Coverage that we have seen recently but the standard form which we want to review right here right now has three coverages, (it's an ISO Form/ Building Ordinance Form) Coverage A, Coverage B, and Coverage C. Lets take this in reverse order:
- Coverage C is the actual increase cost of construction to bring the building in the conformance with all the Building Codes( the building department has said apply). So this is actually the coverage that you've been looking at to increase the insulation in the building, the wiring in the building or what ever environmental condition have to be meet as well as ADA which is "American for Disabilities Act", there's also some requirements there from many structures.
- Coverage B is the demolition cost, to take down all or part of the damage building (it's required by Law and Code). Coverage J, is probably the most complicated part of this three coverage structures.
- Coverage A is for the loss of Value because the building has to be demolished. Just like example, life simple that way, your other building with a replacement cost of one million dollars, you have a fire damaging 70% of the structure. The city inspector tells you that you must now tear the building down. But because your building is only 70% damage by the fire, your insurance company would only pay you $700,000.00 if only you have fire insurance. Without ordinance, your loss would be $300,000.00. But if you had coverage J, insurance company would pay you the full undiminished value of the building or One Million Dollars (for Building Ordinance).
If you are a commercial property owner and have questions on Building Ordinance or any other insurance topic, please contact us to review.