What is Ordinance or Law Coverage?
ORDINANCE OR LAW COVERAGE
(1) Coverage for Loss to the Undamaged Portion of the Building.
Pays for the loss of value of an undamaged portion of the existing building which must be demolished and/or removed to conform to municipal ordinance, code, etc.
Many cities ordinances can force you to demolish an undamaged portion of the building when a loss is to 50% or greater…and some cities in the United States, the loss only has to be 30% or greater.
99% of Insurance policies offer only 10% of the dwelling limit for this, betting on the consumer not having a large loss.
(2) Demolition Cost
Pays for the cost of demolition of the undamaged portions of the building necessitated by the enforcement of building, zoning or land use ordinance or law.
(3) Increased Cost of Construction
Pays for any increased expenses incurred to replace the building with one conforming to building laws or ordinances, or to repair the damaged building so that it meets the specifications of current building laws or ordinances.
Example: Round Lake, IL. When you build a new home in Round Lake today you must have it equipped with a fully operational Fire Suppression System. (Interior sprinkler) Average cost is several thousands of dollars
If a total loss occurs to a home that was built prior to this ordinance going into effect…more than likely, the home was never equipped with this system. Unless you have ordinance and law coverage, the cost to have one put installed is paid for entirely by you.
Why insure my house at full reconstruction value?
If you insure your home for less than it’s full replacement cost to reconstruct, you may be left to pay for a part of a loss you incur, whether it a total loss or a partial. You will pay some percentage of that loss determined by how short you were of the total cost. This is called a co-insurance penalty.
What is the difference between stated amount coverage on an automobile or motorcycle and Agreed Value coverage?
Agreed Amount or Agreed Value
This is the only policy form guaranteeing you in writing what amount you will receive if your “Collector Car” is stolen or totaled during the policy period. Note there is no “Actual Cash Value” clause in the form. The “Agreed Amount” form states the insurance company will pay you, the lesser of:
1. The “Agreed Amount,” or
2. The cost to repair the covered auto, not to exceed the “Agreed Amount”.
The “Agreed Amount” should be reviewed carefully with your agent before the policy is issued. Your agent and you must agree together upon the “Agreed Amount” before the policy is issued. The “Agreed Amount” should represent the true market value of the car at the time the policy is written. If the market value changes during the policy period, the “Agreed Amount” can be changed by endorsement. Before policy renewal each year the “Agreed Amount” should be changed, if necessary, to reflect current market value.
Stated Amount or Stated Value
This form of policy is frequently and easily misunderstood. It is often used on collector car policies. Most insurance agents typically represent it as being the same as “Agreed Amount.” It is not! The “Stated Amount” form states the insurance company will pay the lesser of:
1. The Stated Amount or
2. The cost to repair the covered auto not to exceed the “Stated Amount” or The “Actual Cash Value”
Often, I hear people tell me, “I have stated amount coverage. This is what my car is insured for.”
The misconception is this…
The “Stated Amount” helps determine the premium cost.
It does not guarantee you a settlement amount that reflects the value of the car when a loss occurs. The “Actual Cash Value” language allows the claims adjuster to settle your loss for an amount up to or less than the “Stated Amount.” But no more! Sadly, most insurance agents are unaware of this detail. Most agents, unaware of the actual policy language, will insist if your collector car is stolen or totaled, you will receive the stated value. Wrong!
When renting a car, do I need to purchase the rental agencies extra insurance? The Answer depends…
1. Make sure you have full coverage on at least one car on your personal auto policy for full coverage to carry over to a non- owned rental car.
2. It may be a good idea to purchase physical damage coverage from the rental agency even when you have it on one vehicle on your personal policy. An auto policy will only pay the physical damage to the rental car. It will not pay for the diminished value caused by the vehicle being involved in an accident or the loss of use the rental agency may come after you for lost income while car was being repaired.
Your personal auto policy will not pay for these things. They can come after you personally unless you purchase their physical damage portion of the rental agencies insurance.
Why does RE-construction cost more than NEW-construction?
With new construction, building costs are less because they have a plan to build so many homes and materials are often cheaper when bought in bulk by a builder and ordered in advance. The trades involved all have a plan to come in and perform their work when called to do so.
Reconstruction typically is more costly because none of the above exists. In addition to that, there is cleanup of site and debris removal associated after a loss, some refurbishing of building materials that are salvageable. There’s always a sense of urgency that causes expenses to rise. There is no question that all this taken into consideration, cost associated with Reconstruction can cost upwards of 30% more than new construction…and even more if your home has to adhere to certain city requirements if it’s in a historical district.
Should I make a Home inventory?
Yes, because no matter who you are, you must provide some form of proof of loss during a claim. It is an excellent idea to document your personal belongings either by photo, video and by free inventory software www.knowyourstuff.org
What do I do in case I have a claim and my Agent is not available?
See Our Carriers on website for claims reporting information and our resource section and contact someone from there that can help with your particular claim or concern.
What is considered Flood and does my homeowner’s policy include Flood Insurance?
A flood is the rise of groundwater overflowing onto normally dry land. It could cause seepage or wetness to occur through your foundation walls.
This is not covered under a homeowners policy.
What is the difference between Flood and water backup?
Water back-up generally occurs from within the four walls of the house whether it be damage caused by backup of water by floor drain, sink, shower or tub drain, toilet overflow, sump pump failure, etc…
Flooding occurs by rising ground water caused by rain, ponds, streams, lakes which overflow normally dry ground outside the home.