South Carolina Personal Lines Practice Exam

What does Ordinance or Law Coverage in HO policies refer to?

1. Coverage for outdated appliances

2. Coverage necessary for code changes at time of rebuilding

3. Coverage extending for up to 20% of Coverage C

4. Coverage to enhance personal liability limits

The correct answer is: Coverage necessary for code changes at time of rebuilding

Ordinance or Law Coverage in Homeowners (HO) policies specifically addresses the need for compliance with current building codes during the reconstruction process following a loss. This coverage is crucial because when a home is damaged and needs to be rebuilt, there may have been updates or changes to local building ordinances and laws since the home was originally constructed. These changes could require the homeowner to spend additional money to bring the rebuilt structure up to current code standards, which can involve significant costs that aren't covered under standard dwelling coverage. This aspect of Ordinance or Law Coverage ensures that homeowners can meet these legal requirements without incurring excessive out-of-pocket expenses. The coverage typically applies to the costs associated with the increased cost of construction due to zoning or building code changes, protecting the homeowner against financial burdens that might arise in the rebuilding process. Understanding this type of coverage is essential for homeowners to ensure they have adequate protection for potential rebuilding costs that might not be covered otherwise, especially in areas where building codes are frequently updated.