Increased Cost of Construction Coverage
Hurricane Sandy, which impacted New York City and the surrounding areas in 2012, was one of the most devasting storms ever to strike the region. In the aftermath of this superstorm, many business owners faced the daunting challenge of rebuilding their properties. To complicate the issue, they've had to comply with more stringent building codes intended to make structures safer and mitigate the damage caused by future storms.
Many business owners in the five boroughs and Long Island carried commercial property insurance policies written on a "replacement cost" valuation basis. Replacement cost is the amount that policyholders must pay to rebuild the structure based on its current value. Unfortunately, in the wake of Sandy, many policyholders discovered that the replacement cost did not include the additional expenses required to comply with the upgraded building codes.
Consider the example of a business establishment located in a flood zone. The new codes may require the placing of a rebuilt structure on pilings, which could cost $50,000 or more. A standard commercial property insurance policy typically limits the coverage to only $10,000 in these situations. A type of insurance known as "increased cost of construction coverage" can fill the gap and prevent business owners from having to cover these additional reconstruction costs out of their pocket.
How to Get Increased Cost of Construction Insurance Coverage in New York
For most New York business owners, the best way to obtain the increased cost of construction coverage they need is by adding an endorsement to their commercial property insurance policy. The endorsement, known as the Ordinance of Law Coverage form, consists of three separate coverage areas:
- Coverage A: Coverage for Loss to the Undamaged Portion of the Building — Pays to demolish and reconstruct an entire building to code when it incurs damage equal to or greater than 50 percent of its value.
- Coverage B: Demolition Cost Coverage — Pays for the cost of demolition-related debris removal not included under the base policy's building limit.
- Coverage C: Increased Cost of Construction — This is the portion of the endorsement that covers the extra costs required to meet the updated building codes (installing a stronger roof, upgrading the electrical system, placing the structure on pilings, etc.) when rebuilding.
The additional coverage will only apply if your building's insurance policy was written on a replacement cost basis. It won't apply to situations where you didn't comply with an ordinance or law that was in force before the loss occurred. Also, the endorsement typically won't cover the costs associated with testing for, monitoring or cleaning up pollutants or responding to conditions such as mold, fungus, bacteria or rot.
Kokkoris Insurance Services Can Help You Find Affordable Increased Cost of Construction Coverage in New York
Based in Astoria, Kokkoris Insurance Services has been helping companies like yours meet their insurance needs for more than 25 years. Our dedicated staff will work closely with you to determine the right increased cost of construction insurance coverage that will minimize your risk.
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