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Murphy Insurance2010-02-04 09:00:252024-07-23 16:18:25Massachusetts Drivers Be Aware of New “Move Over Law”A fire causes significant destruction to your building. Because more than 50% of the building was damaged, a local by-law requires the building to be torn down and rebuilt according to current building codes. You’re a responsible businessperson and take the necessary steps to maintain your property. You have replacement cost value on your policy, so you’d be fully covered, right? Not necessarily.
What If This Happened To You? A fire causes major destruction to your building. Because more than 50% was damaged, a local by-law requires the building to be torn down and rebuilt to current building codes. You’re a responsible businessperson and take the necessary steps to maintain your property. You have replacement cost value on your policy, so you’d be fully covered…right? Not necessarily.
Replacement Value Doesn’t Mean Upgrade Cost
Property insurance policies generally have an “Ordinance or Law” exclusion, which means that the policy covers the building as it exists. However, it does not cover the cost of upgrading the building to current building codes and ordinances after a loss. Therefore, having “replacement cost” coverage for your building does not mean that you have “upgrade cost” coverage unless you purchase an “Ordinance or Law Endorsement” for your property. Even if a property policy offers some built-in Ordinance or Law protection, often the coverage isn’t sufficient for a significant loss.
Building codes and zoning laws affect every piece of property, big or small. These laws continually change, requiring new or improved features such as better wiring, handicap access, sprinkler systems, etc. If a loss situation triggers code upgrades, it could be financially devastating unless you have Ordinance or Law coverage.
While some consider this coverage necessary only for older buildings, laws constantly change, and newer buildings can be affected. This is an area of concern for all building owners.
How Ordinance and Law Coverage Protects You
- Coverage for the Undamaged Part of Your Building: Your property insurance policy only protects you against actual damage caused by a covered cause of loss to a building. It doesn’t cover the cost of replacing an undamaged portion of your building that must be torn down and rebuilt because of a local ordinance. The Ordinance or Law, Part A, provides this protection based on the coverage limit you select.
- Demolition Costs: While property insurance covers debris removal for a portion of property damaged by a covered peril, it doesn’t cover demolition expenses for an undamaged building that must be removed. Part B of the Ordinance or Law provides this coverage. Since demolition costs vary based on building size and other factors, be sure that the limit you select reflects your building’s structure.
- Increased Cost of New Construction: If you had a significant loss, it’s wise to assess precisely what upgrades could be required, e.g., sprinkler systems, elevators, wiring, septic systems, etc. The limit you set for Part C requires serious consideration, and talking with a contractor may be helpful in determining the appropriate level of protection.
Ensure Proper Coverage for Your Business
Safeguarding your assets effectively and avoiding potential legal and financial pitfalls is essential. If you aren’t sure that your policy provides protection for Ordinance or Law situations or you know that you don’t have coverage and want more information, contact us. A trusted professional will be glad to review your policy and discuss options.
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Murphy Insurance2010-02-04 09:00:252024-07-23 16:18:25Massachusetts Drivers Be Aware of New “Move Over Law”