There are so many things that should be considered before you purchased insurance. For example, you already know that every community has building ordinances or zoning laws that affect how houses are built or updated. But did you know that there are also laws and ordinances that govern how or whether a house can be repaired after a loss?
When you have a loss that damages part of your house, the repairs, in many situations, must be made to the specifications of any regulations that are in effect at the time of the loss. It doesn’t really matter if everything met code when your house was built. What matters now is the new building code. Even more important than that, there are regulations that may compel you to tear down the house if the damage is more than 40–50% of its value.
You’re probably thinking: “So how does that affect me? Isn’t that what insurance pays for?”
The answer is yes and no at the same time. Insurance pays for the cost to repair or replace the damaged part of the building. Think of it this way: if the value of your house is $200,000 and you have $100,000 in damage, insurance pays for the damage (minus your deductible, of course). But now that your house has sustained damage equal to 50% of its value, the law kicks in and requires you to tear it down—damaged and undamaged parts—and rebuild the whole thing.
Now, since insurance pays for the damaged part of the building, but even the undamaged part has to be torn down, where does the other $100,000 come from? That’s where Ordinance or Law coverage comes in.
There are very few total losses; partial losses are far more likely. But a partial loss could trigger the enforcement of an ordinance or law that could cause you to have to pay more than the amount of loss covered by your policy. Additional coverage may be purchased that would help pay for the value of the undamaged part of the house and the increased cost to rebuild according to the new code.