Which is a component of ordinance/law insurance?

• A. Increased cost of construction
• B. Demolition
• C. Contingent liability
• D. Loss of use of property

Answer: (A)

Ordinance or law coverage is designed to pay the extra costs required to rebuild a damaged structure to meet current building codes and zoning laws. After a loss, you may not be allowed to simply repair the building to its exact preloss condition—you might need upgrades to electrical, plumbing, fire safety, accessibility, or structural standards that have changed since the original construction. The insuring provision specifically covers that additional amount needed to meet those codes, up to the policy limit. That added expense is precisely the increased cost of construction, which is why this option is the correct component.

Demolition-related costs and other risks can be related in some endorsements, but the heart of ordinance or law coverage is the extra construction cost to comply with current codes. Contingent liability and loss of use of property are not core components of ordinance/law coverage.