Ordinance or Law Coverage
Ordinance or Law coverage is a critical component of a church’s property insurance program—particularly for ministries occupying older buildings. This coverage addresses the increased costs associated with repairing or rebuilding a property to comply with current building codes, ordinances, or laws following a covered loss.
Although this coverage is included in most property policies, it is often poorly understood, and its limitations and sub-limits are frequently overlooked until a loss occurs.
Who Needs Ordinance or Law Coverage the Most?
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Churches with older facilities: Buildings constructed decades ago are far more likely to be out of compliance with current codes. Following a covered loss, these properties may be required to undergo extensive and costly upgrades to meet modern building standards.
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Churches located in disaster-prone regions: Areas subject to hurricanes, earthquakes, or other catastrophic events tend to experience frequent updates to building codes. Rebuilding after a loss in these regions often triggers mandatory compliance with newer, more stringent requirements.
Understanding “ABC” Ordinance or Law Coverage
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Coverage A – Loss to the Undamaged Portion of the Building: If a local ordinance requires demolition of the entire structure because the damaged portion exceeds a specified threshold (for example, 50%), this coverage pays for the value of the undamaged portion that must be removed.
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Coverage B – Demolition Cost Coverage: Covers the cost to demolish and remove debris from the undamaged portion of the structure when demolition is required by ordinance or law.
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Coverage C – Increased Cost of Construction: Pays for the additional expenses required to bring the building into compliance with current codes, such as fire sprinklers, electrical upgrades, structural enhancements, or ADA accessibility requirements.
Important Coverage Limitations to Understand
Ordinance or Law coverage is only triggered by a covered cause of loss, such as fire, wind, or storm damage. It does not apply to code upgrades identified during routine inspections, pre-existing violations, or environmental remediation unless specifically endorsed.
Why This Matters
In a significant property loss, Ordinance or Law costs can represent substantial additional expenses. Without adequate limits, churches may face out-of-pocket costs that delay recovery and strain ministry resources.
You need to be aware of the coverage limits under your specific policy and judge if those seem adequate or if you should request information on increasing those coverage limits.
