What Is The Building Ordinance Clause On My Homeowners Insurance Policy?

The building ordinance clause on a homeowner’s policy is a stipulation that states the amount a policy covers for changes in the building code that may have occurred from the date your home was constructed, until the date your home suffered a loss. In the event of a major loss, an insurance company will rebuild your home how it was in the year it was built. However, the building department in each jurisdiction will likely require all new construction to comply with current building code requirements which become more stringent (and expensive) to comply with from year to year. As an example, many original homes built prior to 1930 have small foundations that are not attached to the structure, while modern building codes require significantly upgraded foundations that are permanently attached. In areas such as Folsom, California where significant growth has occurred recently, it is not uncommon for regulation to increase rapidly, while other areas may experience change less frequently. The amount it may cost to upgrade your structure varies greatly based on the situation as well. A 50-year old home built on a steep hillside can expect significant upgrade costs, while a 3-year old home on flat land may experience little change. Many insurance companies give an allowance of 10% of the dwelling coverage to cover building code upgrades. Pay careful attention that the building ordinance coverage is in addition to the dwelling coverage as with some companies such as Farmers, and not part of the dwelling total. Change occurs often in our lives so be sure your insurance advisor conducts at least annual reviews of your policy and you are aware of what is and is not covered, or you may be stuck with a large bill in the event of a major loss instead of a new home.