When it comes to home insurance, we’ve learned that there are many elements in a standard policy of insurance that homeowners don’t understand, or may not even know exist. This article takes a look at one of those often overlooked or misunderstood elements of home insurance: bylaw/upgrade coverage.
What Is Bylaw and Upgrade Coverage?
If your home is damaged or destroyed in a fire, the “Structure” or “Dwelling” exposure of your policy covers the costs of rebuilding the home as it was before the loss. Often, building codes have changed since your home was built, and when it comes to making repairs or rebuilding the structure, you may be forced to change certain aspects to meet the new code requirements.
If you are wondering what bylaw coverage is, know that it compensates the homeowner for the extra costs of including any necessary upgrades in the scope of a repair or rebuild. Remember that your general “Structure/Dwelling” coverage is only responsible for rebuilding the property exactly as it was before the loss. If changes are required because of new code or bylaw requirements, it may cost more to build it with the change then it would have cost to build it the exact same way it was before. Bylaw coverage protects you from paying for those increased costs out-of-pocket.
Common changes include updating to modern building materials and meeting contemporary safety and accessibility standards. Coverage can even include the costs of demolishing the rest of a structure in order to meet current standards.
Do You Have Bylaw Coverage?
By-law coverage may be included in an Insurer’s standard policy; but in other cases, you may have been able to choose whether to add coverage and/or the amount of coverage you need. You may have even been given the option to choose the terms of your bylaw/upgrade coverage. Often basic bylaw coverage will be minimal so if the option is available, consider increasing your coverage if you:
- Have an older or heritage home that would require extensive changes; or
- Know that building codes in your area have changed to require some expensive updates, such as climate-friendly appliances or sprinkler systems.
Do You Know Bylaw Expectations?
When you choose an insurance policy, you probably think about whether the house is in a flood plain or if wildfires could become an issue; not the quirks of local construction. Bylaws are determined by municipal governments to meet local needs, which means they can change considerably from jurisdiction to jurisdiction, even within the same metro area. The changes families need to make after a fire often come as a big surprise.
If you’ve been caught unawares or underinsured after a fire, download our home insurance claim guide and find out what you can do to protect your claim.
Building Code Changes in the 21st Century
Building codes are always changing. In the last decade or two, some of the biggest changes in building codes have been focused around accessibility and climate change.
Codes vary from municipality to municipality, but nationwide codes are developing to reflect a changing climate, and 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; and
- Using new, energy-efficient construction materials or expanding the lifespan expectations of construction (i.e., changing the materials).
In British Columbia, some municipalities have been requiring extensive changes to protect homes from landslides. After devastating landslides struck North Vancouver in 2005, the city now requires significant changes to improve slope stability, including connections to storm sewer systems, the use of retaining walls that allow for sub-drainage (in addition to meeting updated earthquake loads), and even the relocation of bedrooms away from the toe of the slope.
Accessibility will be a big issue as well, especially for business owners or for any structure that is open to the public. Although many exemptions remain in place for older structures, once you do any type of renovation work, including rebuilding after a loss, you must meet new accessibility standards, which may include:
- Ramps that make the building wheelchair-accessible;
- Automatic doors; or
- Accessible washrooms (no stairs to access, wide enough for wheelchair use, grab bars).
These changes can quickly become expensive and exceed your coverage limits.
What If You Live in a 100-Year Old House?
Extra coverage is likely necessary if you live in an older or heritage home, regardless of its exact age. There have been many changes to the national and local codes throughout the 20th century. Changes you may have to make when restoring an older building could 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; and
- Minimum parking requirements.
Getting Help with Bylaw Coverage
Policy limits are one of the most common obstacles to accessing bylaw coverage, as generic terms can include very modest limits. Additionally, depending on the wording of the term itself, coverage may not respond to every bylaw requirement when the structure has to get repaired.
Some policies only cover building code deficiencies for damaged areas caused by the insured perils, not deficiencies that were only discovered during inspection after the peril. What does this mean in practical terms? If a fire has destroyed your sprinkler system, replacing the system is covered. If the building never had a sprinkler system to begin with, despite code requirements, the insurer is not responsible with costs required to put one in.
Be aware of policy wording, as this can be a key difference. You may also talk to an insurance claims professional about disagreements with your insurance company after a loss. They may be able to help you determine how your coverage will respond to bylaw upgrades.
Bylaw/upgrade coverage is an essential component of home insurance. Homeowners living in older homes will face considerably higher costs that can easily exceed generic limits. That being said, as codes continue to be updated to address climate change and the increased frequency of extreme weather events, even homes built recently may be subject to significant updates during reconstruction. Talk to someone local codes and consider investing in additional bylaw/upgrade coverage to avoid paying for a shortfall after a loss.