Most insurance policies say that they will re-build or repair the same home, if it is damaged or destroyed by a covered insurance claim. Most owners with a $250,000 house would never expect that the insurance policy would pay to replace that house with a $1 million home. But so much hangs on those keywords: the same home.
Your insurance policy may pay the costs to recreate an identical home, but the local building codes may not allow the same house to be re-built. Very often, changes to the building code will require that the design or materials used in the new construction, be different than the original home. For reasons of safety, health, and general welfare, the building codes are constantly being revised and updated.
Today, in the United States, most areas follow the International Commercial or Residential Code (ICC/IRC), plus additional codes for electrical, plumbing, and mechanical. All 50 states and the District of Columbia follow these codes. Only the City of Chicago still has its’ own unique set of building codes.
When changes are made to the code, existing homes are usually ‘grandfathered’, meaning that they are not required to make changes now, to meet the new code.
But a major remodeling or repairs after a significant fire or storm damage, frequently will trigger the requirement that the home comply with the current building code. For example, the City of Scottsdale has required fire sprinklers in all residential homes since about 1986. And, any existing home must have fire sprinklers retro-fitted when repairs or renovations involve 25% or more of the structure.
Additional examples of building codes changes are stronger joists and beams in the attic, higher ‘fire walls’ between condos or townhomes that are adjacent to one another, safer location of skylight windows, and placing all gas hot-water heaters on an elevated pedestal to reduce the likelihood that gasoline or paint fumes (that are heavy and stay on the floor), will not be ignited by the pilot light or hot water burner, etc. etc. etc.
Over the years, most insurance companies have added ‘building codes’ coverage to their insurance policies for owner-occupied homes, but virtually none have made this coverage standard for the insurance policy for investor-owned rental properties. That’s really a shame, because in most cases the cost to add this coverage is only about $10 per year. This option provides a separate fund that is usually 10% of the amount that the house was insured for. That means a house insured for $250,000, would have a special fund of $25,000 to be used for the extra costs associated with building code changes.
While a hot water heater pedestal might cost $100, many requirements are a lot more costly, so the $10 or so cost to add “Building Codes” coverage is definitely worth it. Check with your insurance agent today, to be sure you have this coverage. I definitely recommend adding this option if you do not already have it.
CLARK SANCHEZ is a 37-year Arizona insurance agent who has been a Vendor Affiliate with AZREIA for over 13 years. You can contact Clark if you have any insurance related questions at email@example.com.