Texas General Lines — Property and CasualtyPersonal LinesHard
A client lives in an older home that does not meet current building codes. They are concerned about the cost to repair or rebuild their home to modern standards after a covered loss. Which endorsement could address the additional costs associated with complying with building codes?
- AIncreased Dwelling Limit Endorsement
- BOrdinance or Law Endorsement
- CGuaranteed Replacement Cost Endorsement
- DSewer Backup and Sump Pump Overflow Endorsement
Show answer & explanationAnswer & explanation
Correct answer: B. Ordinance or Law Endorsement
The Ordinance or Law Endorsement provides coverage for the additional costs to repair or rebuild a damaged structure to comply with current building codes, zoning laws, or other ordinances. Standard policies often exclude these additional costs, which can be significant for older homes.
Why the other options are wrong
- A. Increasing the dwelling limit only raises the maximum payout for covered perils; it doesn't add coverage for excluded costs like code upgrades.
- C. Guaranteed Replacement Cost extends Coverage A beyond its stated limit, but typically does not cover costs due to code upgrades unless specifically included.
- D. This endorsement covers water damage from specific sources and is unrelated to building code compliance.
Ordinance or Law Endorsement
An Ordinance or Law Endorsement adds coverage to a property insurance policy for the increased costs of repair or reconstruction due to the enforcement of building codes, ordinances, or laws.
- Standard policies typically exclude these costs.
- Crucial for older homes that may not meet current codes.
- Can cover the undamaged portion of a building that must be demolished or upgraded.
Memory trick: For 'O'ld 'L'aws and 'C'odes, get the 'O'rdinance 'L'aw 'E'ndorsement.