Recently, a church in Dansville, NY, made headlines after it partially collapsed and had to be demolished. While this was already a tragic and expensive loss, what made the situation even more difficult was that the entire building had to be torn down — even though only part of it collapsed. Why? Because local building code required it.
This event is a real-world example of a question we hear from clients all the time:
“Why do I need to insure my building for 100% of its value? What are the chances I’ll ever have a total loss?”
The answer: You don’t need a total loss to trigger one.
🚨 The 50% Rule
Many towns and municipalities follow what’s commonly known as the “50% rule”. This means:
If your building suffers damage equal to or greater than 50% of its current value, local code may require that the entire structure be demolished and rebuilt to modern code — even if parts of the structure are still standing.
So while a fire, collapse, or storm might only damage one side of your property, the entire building may need to come down. And unless you’re insured for 100% of your building’s replacement cost, you could be seriously underinsured when it comes time to rebuild.
🧱 What Is Ordinance or Law Coverage?
Most standard business or property insurance policies cover the cost to repair damages, but they don’t automatically cover the cost to bring your building up to current code or to demolish the undamaged portion of the structure. That’s where Ordinance or Law coverage comes in.
Ordinance or Law coverage is a critical add-on that protects against:
- The cost to demolish any undamaged parts of your building (if required by law),
- The cost to rebuild the entire structure up to current building codes, and
- The increased construction costs that come with code upgrades (like wiring, plumbing, sprinkler systems, ADA compliance, etc.).
Without this coverage, even if you’re insured for the building itself, you could be left with tens or hundreds of thousands of dollars in uncovered expenses.
🛠️ Don’t Wait for a Wake-Up Call
If you own a commercial property or investment building, now is the time to:
✅ Review your replacement cost estimate.
✅ Make sure you’re insured to 100% of the rebuilding cost.
✅ Check your Ordinance or Law coverage limits — or add it if it’s missing.
✅ Ask your agent to walk you through local code risks.
Even if your building is structurally sound today, one unexpected event can trigger this type of coverage need. Be ready before it happens.
