Increased cost of construction (ICC)

Ordinance or law coverage has three separate parts, and increased cost of construction (often called Coverage C) is the one that pays the extra cost to rebuild the damaged portion of the building to current code. The other two parts are distinct: coverage for the loss in value of the undamaged portion the code forces you to tear down (Coverage A), and the cost of the demolition itself (Coverage B). ICC responds to the code-upgrade premium on what you are already rebuilding, for example bringing wiring, plumbing, fire sprinklers, wind bracing, or accessibility up to the code in force at the time of loss rather than the code the building was originally built to. The base property policy pays to replace like for like; ICC pays the gap between like-for-like and code-compliant. The Fannie Mae Selling Guide (section B7-3, Property and Flood Insurance) requires ordinance or law coverage where a project is exposed to a building code that would increase the cost of reconstruction, which is the requirement this component satisfies. ICC is almost always written as a sublimit, commonly expressed as a percentage of the building limit, so the coverage exists but is capped well below the full replacement cost.

Increased cost of construction is the ordinance or law component that does the heaviest lifting on an older community-association building, because it is the code-upgrade cost on the part you are actually rebuilding, and on a 30 or 40 year old structure that upgrade can run a large fraction of the base reconstruction cost. The trap is the sublimit. A policy can show ordinance or law coverage as present, satisfying the yes/no question, while the ICC piece carries a token sublimit, for example a flat figure or a low single-digit percentage of the building value, that runs out long before a code-heavy rebuild is finished. When it runs out, the association funds the remaining code-upgrade bill through a special assessment. Do not stop at confirming ordinance or law is on the policy; open the declarations and read the increased-cost-of-construction limit specifically, confirm it is a meaningful percentage of the building limit rather than a placeholder, and confirm it is stated separately from the demolition and undamaged-portion limits rather than shared across all three. In older or code-sensitive jurisdictions, treat the ICC sublimit as a number to raise deliberately, not accept at default.

The dedicated community-association specialty markets write ordinance or law as a package feature, but the increased-cost-of-construction sublimit inside it is where the real coverage lives and where accounts run thin. The three parts are frequently sublimited separately, and ICC is the one most worth buying up, since it scales with the age of the building and the strictness of the local code. Raising the ICC percentage is usually an inexpensive endorsement relative to the exposure it closes. A policy that shows ordinance or law with a nominal ICC sublimit is close to no coverage on a code-driven rebuild, so read the declarations for the specific increased-cost-of-construction figure rather than relying on the coverage simply being listed.