Building Ordinance Coverage — coverage for loss caused by enforcement of ordinances or laws regulating
construction and repair of damaged buildings. Older structures that are damaged
may need upgraded electrical; heating, ventilating, and air-conditioning
(HVAC); roofing materials; fences; and plumbing units based on city codes. Many
communities have a building ordinance(s) requiring that a building that has
been damaged to a specified extent (typically 50 percent) must be demolished
and rebuilt in accordance with current building codes rather than simply
repaired. Unendorsed, standard commercial property insurance forms do not cover
the loss of the undamaged portion of the building, the cost of demolishing that
undamaged portion of the building, or the increased cost of rebuilding the
entire structure in accordance with current building codes. However, coverage
for these loss exposures is widely available by endorsement. Standard
homeowners policies include a provision granting a limited amount (e.g., 10
percent of the dwelling limit) of building ordinance coverage; this amount can
be increased by endorsement.