Complying with new building codes after disaster: Are you covered?
Home insurance pays the general costs of rebuilding after a covered disaster, but not all policies cover the added expense of conforming to current building standards.
The coverage gap can be a costly surprise if you have an older home that hasn't been recently upgraded.
Building codes vary by community, and they change over the years, particularly after disasters, to make new buildings safer. New building standards have been developed in many regions after earthquakes, floods and wildfires. Existing homes don't have to comply to new codes until they are rebuilt.
Are you covered? Maybe, maybe not
Whether you have coverage for building code ugprades depends on your policy. Some high-end home insurance policies include the coverage. Fireman's Fund, for instance, offers unlimited coverage in most states for building code upgrades, in its Prestige Home product, which is geared to homes worth more than $500,000.
Some other home insurance policies include a small amount of coverage for building code upgrades, yet many standard home insurance policies include no building code upgrade coverage. That means if your home was not up to code when it was damaged or destroyed, you have to pay the added construction costs of conforming to the latest building standards.
The problem is one many East Coast homeowners faced in the wake of Superstorm Sandy last year. Thinking they had full coverage, they were caught by surprise to learn they had to pay for upgrades out of pocket to meet new building regulations.
How to get protection for building up to code
If your policy doesn't include the coverage, you can get it by purchasing a "law and ordinance insurance" endorsement, or add-on to your policy. The endorsement costs only about $50 to $75 a year but could save you thousands if you ever have to make a claim to rebuild your home.
Talk to your insurance agent or company, and review your policy to see if you have building code upgrade coverage. It's recommended if you have an older home or if you live in a place where building standards have been changed since your home was built or undergone a major remodel.