When a commercial building is damaged and must be rebuilt, owners rely on claim payments from their business commercial property insurance policy. Unfortunately, it is not uncommon for property owners to find that the money received through their commercial insurance is not enough to rebuild due to ordinance changes since the structure was originally built.
If you are a property owner, you could find yourself in a financial bind when your rebuilding project is more expensive due to increased or changed ordinances. To avoid this situation, it is recommended that you add property gap coverage to your business insurance coverage.
Local Building Ordinances Change Over Time
Local building codes and ordinances are developed to ensure that buildings are constructed in compliance with local safety laws. Commercial insurance companies realize that laws do change over time and when they do, local ordinances are adjusted to ensure continued safety. Buildings originally constructed prior to newer building ordinances may no longer be in compliance with current building ordinances.
In some situations, property owners are required to make necessary changes to a building to comply with new ordinances and maintain their business insurance coverage. Other times, changes may be exempt and property owners not required to modify their property to comply.
This comes into play if the covered building sustains damage and must be repaired or rebuilt. When this happens, a building owner must make required changes to meet updated ordinances or lose the lawful ability to use the building as well as your business commercial property insurance coverage.
Ordinance or Law Insurance Exclusions
While making ordinance updates when a building is being repaired may not seem like a major concern, it does frequently require additional labor and funds. Standard business insurance coverage does not pay for these added expenses. This means that if you are the owner and faced with making substantial improvements to bring your property up to current ordinance compliance, you must finance the improvements yourself.
Ordinance or law exclusions in a commercial insurance policy only pay to restore the building to the condition it was before the loss and not for modifications, even if they are required to comply with an updated ordinance.
How Ordinance Gap Insurance Helps
Ordinance gap insurance is offered by many business commercial property insurance companies and pays benefits when rebuilding requires improvements to meet updated building ordinances. Like any other gap insurance, the purpose is to ensure that a property owner has the funds to rebuild, even when their standard policy will not cover such improvements.
This is an additional insurance expense that you must incur, one that can make the difference between being able to rebuild or otherwise face a total loss in the event of a partial building loss.
If you are the owner of a commercial property, you normally buy a standard commercial insurance policy that covers both your business and buildings; however, adding supplemental ordinance gap business insurance coverage is highly recommended.
In the event your building suffers a substantial loss, ordinance gap coverage ensures that any legally required improvements or modifications to meet current building ordinances will also be covered by your business commercial property insurance policy!