For any prospective property owner who is drawn to the romance and history of older buildings, it is important to understand that restoring it comes with a unique set of challenges. Their charming facades or classical architectural features may sway you to consider them as your ultimate renovation project. However, you can’t forget to do your homework first. Chances are that your dream project wasn’t built to current building codes or by-law (or bylaw) standards. For that reason, a savvy consideration will be to purchase by-law insurance coverage.
What exactly is by-law insurance coverage?
By-law insurance coverage provides protection against losses resulting from the enforcement of new by-laws, or changes to existing ones, that increase the cost of repairing or replacing your home following a loss. Following an insured loss, sometimes the use of more modern materials or methods is needed in order to comply with current by-laws. In the event your property suffers damage, by-law insurance coverage will pay for the increase in costs to meet the mandatory standards by current and stricter safety or building code requirements.
Common changes include:
- Updating to modern building materials
- Meeting contemporary safety standards
- Meeting contemporary accessibility standards
- Costs of demolishing the rest of a structure in order to meet current standards
In certain cases, it will even cover the cost of partially or completely demolishing a structure. If demolition is required for your repair or rebuild to meet code compliance.
Your homeowners’ policy and by-law insurance coverage
If your home is damaged or destroyed in a fire or other listed peril, the “structure” or “dwelling” exposure of your policy covers the costs of rebuilding the home as it was before the loss. Often, building codes are different from the time you last saw them in your contract. When it comes to making repairs or rebuilding the structure, you may need to change certain aspects to meet the new code requirements. If changes are required because of new code or by-law requirements, it may cost more to build it with the change then it will to build it the exact same way it was before. By-law insurance coverage protects you from paying for those costs out-of-pocket.
Do you have by-law insurance coverage?
By-law insurance coverage may be included in an insurer’s standard policy. However, in other cases, you may have been able to choose whether to add coverage and/or the amount of coverage you need. You are often given the option to choose the terms of your bylaw/upgrade coverage. Basic by-law insurance coverage will be minimal. Therefore, if the option is available, you should consider increasing your coverage if you:
- Have an older or heritage home that requires extensive changes
- Know that current building codes in your area require some expensive updates, such as climate-friendly appliances or sprinkler systems
Building code changes in the 21st century
Some of the biggest building code changes in the past few decades have been focused around accessibility and climate change.
Codes can vary from municipality to municipality, however nationwide codes are developing to reflect a changing climate. As a result, the National Building Code is being updated. Some of the changes you may encounter during your rebuild may include:
- New roofing standards to handle stronger and more frequent storms
- Drainage and plans to handle more frequent flooding, such as basement flood protection
- Using new, energy-efficient construction materials or expanding the lifespan expectations of construction (i.e., changing the materials)
While this relates more specifically to business owners or for any structure that is open to the public, accessibility does play a part in code determination. Once you do any type of renovation work, including rebuilding after a loss, you must meet new accessibility standards (if applicable – for example home-based businesses). They may include:
- Ramps that make the building wheelchair-accessible
- Automatic doors
- Accessible washrooms (no stairs to access, wide enough for wheelchair use, grab bars)
These changes can quickly become expensive and exceed your coverage limits, which is why by-law insurance coverage may be necessary.
Living in a Heritage Home
Extra coverage is likely necessary if you live in an older house or heritage home, regardless of its exact age. There have been many changes to both national and municipal codes throughout the 20th century. Changes you may have to make when restoring an older building can include:
- Foundation, wall, and roof construction
- Building height and setbacks to comply with new local standards
- Fire prevention
- Additional emergency exits
- Changes to bring secondary suites up to code
In general, the more expensive a home is to repair and maintain, the more expensive the insurance for the property will be. Many historic properties weren’t built to meet today’s building and safety standards. Therefore, the process of buying an older home and understanding the requirements can be very different. By-law insurance coverage ultimately provides greater financial security to anyone considering the purchase of an older home or staying in their home for a decade or more.
What’s in your policy?
Policy limits are one of the most common obstacles when accessing by-law insurance coverage. Almost all home insurance policies include special clauses and a basic level of coverage for changes to the building codes in your area. However, generic policy terms include very modest limits.
If you are a property owner, it would be in your best interest to note that bylaw coverage may not be responsive to every bylaw requirement identified while repairing your home after an insured loss. In fact, many by-law coverage endorsements only require your insurer to provide coverage for repairs necessary as a result of the insured peril. Depending on the wording of the policy, your insurer may not have to provide coverage for the repairs you need to cover outdated code violations simply discovered as a result of the loss.
Codes are continuously updated
Upgrade or by-law insurance is an essential component of home insurance. If you are a homeowner living in an older home, you will face considerably higher costs that can easily exceed generic limits. That being said, codes continue to update to address climate change and the increase in frequency of extreme weather events. Even if your house is not a heritage home, recently built structures may be subject to significant updates during reconstruction, too.
It’s likely you won’t find out about any changes to your local bylaws unless you have to make an insurance claim. With basic coverage, there’s a chance that covering the excess costs of repairing or rebuilding will fall on you.
By-law insurance coverage: A summary
Due to the unique financial risk posed by older homes, adding on by-law insurance coverage to your home policy provides that extra risk protection. To ensure that your home can receive repairs or rebuilt to the latest standards in your local jurisdiction, this type of coverage can prove invaluable. When investing in something as significant as a house, it makes a lot of sense to ensure that you tailor your insurance to its specific needs. As with any insurance, it simply means avoiding major expenses later. With older homes, this is something very real to consider.
Although this coverage comes standard with some property policies, an increase in limits are available (in some provinces). Please connect with your isure broker to ensure that you have adequate coverage to protect you and your family.