If a disaster covered by home insurance destroys your house, the cost of meeting new building codes might catch you by surprise.

Most standard home insurance policies don’t cover the cost of bringing the house up to current codes if the structure didn’t meet the latest regulations before disaster struck. But if you add on building code coverage to your policy, then they will.

It’s a problem that many East Coast homeowners faced in the wake of 2012’s Superstorm Sandy. Hundreds of residents in risky flood zones in Connecticut had to elevate their homes and/or rebuild them. Houses that needed to be rebuilt had to meet current sea level elevation requirements and all other building codes.

You can get some financial relief from the Federal Emergency Management Agency, which offers homeowners with flood insurance $30,000 of “Increased Cost of Compliance” coverage to help pay for the elevation. However, that’s often not enough to cover the cost.

Key Takeaways

  • Building code coverage covers the cost of bringing your house up to current codes if a disaster strikes.
  • Building code coverage is not included in homeowners insurance but you can add it to your policy.
  • Adding building code coverage to your policy will come at an additional cost.

What is building code coverage?

Building code coverage is supplemental insurance coverage that you can add to your homeowners insurance policy. It covers the cost of keeping your home up to code if it is damaged, but it comes at an additional cost.

Without this coverage, you may have to pay for many of the costs of repairing or rebuilding your home on your own. 

Many consumers don’t realize this isn’t included in their standard coverage, and they don’t learn about the insurance holes until they file a claim.

Unless you’re in the construction trades, you’re probably unaware of how building codes have changed through the years. After all, you’re not required to update the house every time a code is changed. But once you rebuild, all the current regulations come into play. Having building code coverage prepares you for this.

Building codes vary by location and they change as the result of disasters, such as earthquakes or floods.

Many new codes were created after the 1906 San Francisco, 1933 Long Beach, 1971 San Fernando and the 1994 Northridge earthquakes in California, for instance. New building standards to protect homes better from wildfires were developed after the 2003 and 2007 Southern California wildfires. New construction standards have also been set in flood zones in many parts of the country.

Older homes are more expensive to bring up to code.

Do you need building code protection?

Building code protection is a valuable add on to your homeowners insurance policy so that you never have to pay out of pocket if your local building codes change. It is especially valuable to homeowners who live in an older home, where there is a higher chance the home isn’t up to code. 

How much building code coverage should I have?

It depends. Homes that cost over $500,000 may be able to get unlimited coverage. But in some states, the amount you can get is capped. For example, in Florida coverage is capped at 30% of dwelling insurance coverage.

Some other home insurance policies, meanwhile, include a small amount of coverage for building code upgrades, and others include no coverage. That doesn’t mean you have to go without. To get coverage for building code upgrades, you can buy “law and ordinance insurance” as an add-on to your home insurance policy.

Review your home insurance policy with your agent to determine whether you have coverage for building code upgrades and if you should purchase additional coverage. You may especially need it if you live in an older home or live in an area where building codes have changed a lot, such as coastal and earthquake-prone areas.

Additional contributor: Barbara Marquand

Frequently Asked Questions

Does homeowners insurance include building code coverage?

No. Building code coverage is additional coverage that needs to be added on to your homeowners insurance policy.

What is code coverage in homeowners insurance?

In homeowners insurance, code coverage pays for any repairs you have to make to a home to keep up with local code ordinances.

Does insurance pay for code upgrades?

Homeowners insurance will only pay for code upgrades if you added on building code protection to your policy.

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