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Bruce Sackrison

Bruce Sackrison is a Napa Valley Register columnist who will write about property and casualty insurance matters.

If your home is severely damaged due to a fire, you may not have enough insurance to rebuild your home... even if you have replacement coverage!

How can that be? Simple. Your homeowners policy covers rebuilding your home to the “same quality” and “similar materials” that existed before the fire.

Your policy specifically limits or excludes the cost to rebuild to new building codes. It will also not pay for demolition of undamaged parts of your home.

This is critical coverage in California because our building codes and local laws are constantly changing. So, I’ll do my best to explain what this coverage is, and why you should care.

A typical “ordinance or law coverage” endorsement covers three things:

Coverage A: Loss of the undamaged part of your home

Hapless Hank survived the fire. But his beautiful home was badly damaged. The county said that since 58 percent of his home was destroyed, the entire home had to be demolished before he could rebuild. He thought he was OK since he had replacement coverage.

But he wasn’t OK.

The insurance company would agree to pay for only the 58 percent that was damaged, not the 42 percent of his home that was undamaged. Insurance doesn’t pay to fix or replace perfectly fine things.

Ordinance or law coverage could have protected him against this terrible event.

Coverage B: Cost to demolish the undamaged part of your home

Frustrated Fred had a similar problem. Sixty percent of his home was destroyed. Instead of rebuilding, he took the insurance settlement and went shopping for a new home.

But the county required him to demolish his entire existing home, due to excessive damage.

Again, insurance was not going to pay to demolish the 40 percent that wasn’t damaged, just because local officials required it. Frustrated Fred had to pay $20,000 of demolition costs out of his own pocket.

Ordinance or law coverage could have covered this.

Coverage C: Increased costs to meet new building codes

Surprised Sally lost her entire home in the wildfire. She was glad that she had purchased replacement coverage a few years ago. She looked forward to her home being rebuilt.

So, imagine the surprise when she found out that her home, which was built in 1973, would need to be rebuilt to current building codes, and that it was going to cost far more than she had imagined!

She checked her policy, and she had ordinance or law coverage for this. Yay! But it was limited to just 10 percent of the total insured amount. So, she had just $30,000 in coverage to meet new building codes.

But new building codes required an additional $70,000 in construction costs.

Surprised Sally wasn’t going to be able to rebuild her beloved home.

My advice

Many of our neighbors in Napa and Sonoma counties experienced these surprises in coverage last fall when the tragic fires hit us hard. They thought they had enough coverage... and they didn’t.

Too many homeowners, business owners, and landlords have a limit of just 10 percent of the dwelling amount for this, when in fact they may need 25 or 50 percent coverage.

Please call your local agent to make sure you have enough ordinance or law coverage on your policy.

Bruce Sackrison is an insurance property and casualty broker affiliated with Professional Insurance Associates. He is at 707-931-0186 or