By Christopher Vogt – Baron Insurance Group

Recently Pennsylvania adopted a statewide requirement that starting January 1, 2010 all new one and two family townhouses be built with a residential fire sprinkler system. Did you know that if you own a townhome without a sprinkler system this new regulation may affect your homeowners insurance?

Many cities have specific ordinances or laws which state that if a building is damaged, it must be rebuilt to meet certain specifications or construction codes.  Since the new construction code now requires a sprinkler system be installed for all newly built townhomes, any older townhomes that are rebuilt would also have to confirm to this new code and have a sprinkler system installed.

The Bad News: According to the Federal Emergency Management Agency, the average cost to install a residential sprinkler system in an existing home is approximately $2.50-$5 per square foot assuming you have an adequate and reliable water supply. Thus, if an average 1,500 square-foot townhouse was in a fire, it could cost an additional $7,500 to just install the required sprinkler system to meet the new construction code.

The Good News: If you have a covered homeowner insurance claim on a townhouse without a sprinkler system, most policies have a coverage called “Ordinance & Law” to help cover the cost of adding one. This provision covers:

• The cost to tear down the undamaged portion of the house
• The cost to rebuild the home up to the Current Construction Code

The standard amount of Ordinance & Law coverage under a standard HO-3 homeowner insurance policy is 10% of the home coverage for a covered loss (more coverage may be provided by endorsement). For example, if that same 1,500 square-foot townhouse house is insured for $150,000 then the Ordinance & Law coverage may be $15,000.

The Potential Risk: In this example, $15,000 of Ordinance & Law coverage sounds like more than enough coverage since the average townhome sprinkler system should cost around $7,500, but remember this coverage is also used to rebuild the townhouse to all current construction codes plus the cost to tear down the undamaged portion of the house. Thus, the standard 10% of Ordinance & Law coverage may not be enough for a townhome that requires a sprinkler system plus other significant changes to meet construction codes.

What Townhome Owners Should Do:

• Make sure you have Ordinance & Law coverage on your homeowner insurance policy. The coverage details can be found in your policy or by calling your agent.
• Work with your insurance agent to determine how much Ordinance & Law coverage is needed. Some factors to include would be the sprinkler system installation cost, home location and the age of the home.
• Add extra Ordinance & Law coverage by endorsing your homeowner policy if needed.

Christopher Vogt, Insurance Agent

Baron Insurance Group

20 E High St, Manheim, PA 17545

717-665-2985

chrisv@baroninsurnacegroup.com

Twitter: @christophervogt