Ordinance and Law Insurance for Your HOA

AdobeStock_83054003-minYour HOA probably already has basic insurance to protect your community in the event of a natural disaster. However, basic insurance isn’t always enough to fully pay for what needs to be done. If you want total coverage, your HOA should consider getting ordinance and law coverage added on to your insurance package. Check out the different ways this coverage can help you rebuild.

Covers the Undamaged Portion

When disaster strikes, it doesn’t always destroy the entire building. A fire may only destroy a portion of a building. However, the Fire Marshal or Building Department may require you to tear down the undamaged portion of the structure before rebuilding. If you only have basic insurance coverage, it won’t cover the cost to rebuild the undamaged portion. It only covers the cost of the part that was actually damaged by the disaster. Therefore, the rest of the money will have to come out of the HOA reserve funds or be collected by increasing HOA monthly fees. If you have ordinance and law coverage, however, it will pay for the entire building.

Covers the Demolition

If you do have to tear down part of the structure that wasn’t damaged, your basic coverage probably won’t pay for the cost of demolition. Again, that cost will come from the homeowners. However, with ordinance and law coverage, the demolition is covered, so the responsibility doesn’t fall on the homeowners or put a strain on the HOA finances.

Covers the Increased Cost of Construction

Another problem you may face if you just have basic insurance is that it will only cover the cost of the original building. If you have made enhancements to the original building, they will not be covered, so you will have to forgo them or pay for them from HOA funds. Similarly, the older building may not have been up to current code regulations, but the new billing will have to be. Your basic coverage may not pay for that, but you have to meet the updated codes, so the HOA will pay for the upgrade. If you have ordinance and law coverage, it covers these extra costs.

Don’t get stuck paying expensive construction costs after a disaster. Choose ordinance and law coverage. Basic coverage may leave you with a subpar building or force the HOA to pay for expenses from vital HOA funds.

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