Does your commercial building need Ordinance Or Law Coverage? YES IT DOES!

10/1/2019 (Permalink)

How much ordinance or law coverage to you need? There is no way to get an exact number but you should look at the worst case scenario.

Commercial structures built more than a few years ago are most likely deficient in some aspect of the applicable building code.  Building codes change rapidly and in large insurance losses, having too little or no Ordinance or Law coverage can potentially cost you a substantial amount of out of pocket expense.  Ordinance or Law provides three critical areas of coverage: Coverage for Loss to the Undamaged Portion of the Building, Demolition Cost and Increased Cost of Construction Coverage. Many reconstruction projects frequently uncover code issues and without Ordinance me, the building owner is responsible for the additional cost.  According to Adjusters International Disaster Recovery Consulting, compliance with ordinances and laws after a loss can add 50% or more to the cost of the claim.  A tough pill to swallow if your business has to pick up the expense! 

How much ordinance or law coverage to you need?  There is no way to get an exact number but you should look at the worst case scenario.  For Coverage A, Loss to the Undamaged Portion of a Building,  experts suggest choosing the total limit scheduled in your property policy. For Coverage B, Demolition Costs, a rule of thumb is $5 per square foot.  Coverage C is for the Increased Cost of Construction and one suggested method for determining coverage uses cost averaging.  Experts suggest multiplying .5-1% of the building value by the age of the building to come up the amount of insurance coverage required.   For example at 1%, a ten year old $500,000 building would need $50,000 in coverage (1% X 500,000=$5000 X 10 Years= $50,000). You can also ask your insurance agent about blanket coverage. 

Don’t be caught short on funds to get back in business after a disaster.  Be sure to review your Ordinance or Law coverage with your commercial insurance agent and seek advice regarding the recommended amount of insurance coverage.  If a disaster strikes your business, the trained staff at SERVPRO of Northern Summit County are commercial restoration experts and are here to help.  Call 800-648-1212 for assistance 24/7.