The "Ordinance or Law Limit of Liability" in a homeowners insurance policy refers to coverage that helps pay for additional costs you may incur due to building codes or local laws when repairing or rebuilding your home after a covered loss. Here's a breakdown of how it works:
- Coverage for Code Upgrades: If your home is damaged, local building codes may require you to rebuild or repair it to current standards, which can be more costly than simply restoring it to its previous state. These codes could relate to electrical systems, plumbing, construction materials, or other aspects of building safety and efficiency.
- Additional Costs: The extra costs associated with these code upgrades can be significant. Standard homeowners insurance policies typically don't cover these additional expenses unless you have specific ordinance or law coverage.
- Percentage of Dwelling Coverage: The limit of liability for this coverage is often expressed as a percentage of the dwelling coverage in your policy. For example, if your dwelling is insured for $200,000, and your ordinance or law coverage is 10% of that amount, you would have up to $20,000 available to cover these additional costs.
- Partial Losses: This coverage is also important in cases of partial loss, where only part of your home needs to be repaired or rebuilt, but those repairs need to comply with newer, stricter codes.
- Policy Endorsements: Some policies include ordinance or law coverage as a standard feature, while others offer it as an optional endorsement for an additional premium.
- Variation by Location and Policy: The availability and specifics of this coverage can vary depending on your location and the insurance company. It's always a good idea to review your policy or speak with your insurance agent to understand the details of your coverage.
