Homeowners insurance: How much ordinance or law coverage do I need?

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Huygens
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Homeowners insurance: How much ordinance or law coverage do I need?

Post by Huygens »

I understand that in the event of a major loss where a home needs to be rebuilt, standard homeowners insurance policies ("Coverage A" or dwelling coverage) won’t cover the additional costs of complying with current building codes. In other words, the policy will only pay to replace what was there prior to the loss, but it will not pay for any additional changes required by building codes.

An ordinance or law coverage rider covers this gap, but it isn't clear to me is how much ordinance or law coverage is actually necessary. I've noticed insurers offer ordinance or law coverage equal to 10%, 25%, or 50% of the policy’s dwelling coverage. These feel like somewhat arbitrary numbers, and I'm no expert in building codes. How should I decide? What are the factors I should consider?
sport
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Re: Homeowners insurance: How much ordinance or law coverage do I need?

Post by sport »

How much do these options cost? If they are inexpensive, why not?
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Huygens
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Re: Homeowners insurance: How much ordinance or law coverage do I need?

Post by Huygens »

sport wrote: Wed May 05, 2021 11:21 pm How much do these options cost? If they are inexpensive, why not?
About 50 to 100 dollars a year more between each option.
cacophony
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Re: Homeowners insurance: How much ordinance or law coverage do I need?

Post by cacophony »

Huygens wrote: Wed May 05, 2021 10:54 pm ... How should I decide? What are the factors I should consider?
If the dwelling is very much behind code right now that would be a big factor.
scifilover
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Re: Homeowners insurance: How much ordinance or law coverage do I need?

Post by scifilover »

How old is your house? The older the home, the greater the need for this coverage. Wood framed homes built in the 70s like my current house have 2x4s and now need 2x6s. Single pane windows must now be double pane. Even my chimney would need an additional external support. The list goes on and on.
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Huygens
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Re: Homeowners insurance: How much ordinance or law coverage do I need?

Post by Huygens »

scifilover wrote: Thu May 06, 2021 6:49 am How old is your house? The older the home, the greater the need for this coverage. Wood framed homes built in the 70s like my current house have 2x4s and now need 2x6s. Single pane windows must now be double pane. Even my chimney would need an additional external support. The list goes on and on.
Yes, age is really the only factor I could think of. Our house was built in the 50's, but it was significantly renovated with permits by a previous owner about ten years ago. It's unclear to me how behind code we are. I was leaning towards the 25% of dwelling coverage option, but I was curious if there was a more rigorous method to choosing.
scifilover
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Re: Homeowners insurance: How much ordinance or law coverage do I need?

Post by scifilover »

Huygens wrote: Thu May 06, 2021 9:44 am
scifilover wrote: Thu May 06, 2021 6:49 am How old is your house? The older the home, the greater the need for this coverage. Wood framed homes built in the 70s like my current house have 2x4s and now need 2x6s. Single pane windows must now be double pane. Even my chimney would need an additional external support. The list goes on and on.
Yes, age is really the only factor I could think of. Our house was built in the 50's, but it was significantly renovated with permits by a previous owner about ten years ago. It's unclear to me how behind code we are. I was leaning towards the 25% of dwelling coverage option, but I was curious if there was a more rigorous method to choosing.
You could look at the permits and see what was done.....was the work appearance related: flooring, kitchen and bath updates, roof....was there an addition?....do you have a GFI circuit breaker? About the only way you would know better for your home is to have a contractor look.....Maybe there is a property claims adjuster reading this thread who could comment....
ChicagoBear7
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Re: Homeowners insurance: How much ordinance or law coverage do I need?

Post by ChicagoBear7 »

Regarding Ordinance and Law coverage, be sure to know exactly what will be covered by your policy. If there is a fire in the kitchen and electrical or plumbing codes have changed, will your policy cover upgrading the electrical and/or plumbing in the damaged and undamaged areas of the house - or just the damaged area? (Depending upon the amount of damage, many municipalities will require upgrading throughout the building.) Obviously, there is a huge difference in the cost of such extensive repairs and the amount covered by insurance.
Teague
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Re: Homeowners insurance: How much ordinance or law coverage do I need?

Post by Teague »

The percentages seem arbitrary, true, so it would be best if you could decide in advance what sort of loss you planned to have.

Will the mother-in-law cottage get plowed into by a wayward driver? Maybe you'd need only the 10% option.

Will you have a regional major disaster whereby the whole house is leveled, and local labor and material costs skyrocket for months? Maybe you'd be better off with the 25% or 50% choices.

I think you'd need some sort of future knowledge of events to estimate with any certainty how much coverage would be best.
Semper Augustus
talzara
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Re: Homeowners insurance: How much ordinance or law coverage do I need?

Post by talzara »

Teague wrote: Sun May 09, 2021 11:12 am Will you have a regional major disaster whereby the whole house is leveled, and local labor and material costs skyrocket for months? Maybe you'd be better off with the 25% or 50% choices.
The OP asked about ordinance or law coverage, which only covers the costs to bring the house up to code.

Higher costs of labor and building materials are covered by extended replacement cost endorsements.
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