Updated 6 months ago on . Most recent reply
Landlord insurance coverage for Chicago non legal units
Can somebody shed some light on how Landlord insurance deals with coverage of these illegal basement units in Chicago?
Do they provide coverage regardless whether is a legal unit or not?
Can they pull out of paying a claim if it was triggered due to an event that originated from that basement non legal unit?
Thank you in advance for your responses.
Most Popular Reply
Absolutely. To start it is separate from an umbrella. The umbrella is a separate policy that deals with the liability aspect, helps protect you if you are sued. Ordinance or law coverage deals with the physical damage aspect and exists as an optional add-on to a landlord or homeowners policy. Both are usually recommended, however, neither are required.
The main reason to add this coverage is because a standard policy excludes any loss or increased cost that results from the enforcement of a code, an ordinance, or a law that regulates or requires the construction, demolition, remodeling, renovation, or repair of property or the removal of its debris. This exclusion works as a bit of a catch-all saying, we're not insuring illegal structures. However, what about structures grandfathered into modern building codes? They are fine to continue being occupied according to the local ordinance, but you cannot build new non-conformities.
The amount of insurance for your building is determined by what the insurance company determines it would cost to rebuild your building in "like kind and quality" or the replacement cost. Since you cannot build new non-conformities, if your building was destroyed, your insurance company would not be able to deliver you a new building in the same quality and condition it was before destruction. They would have rebuild the building in accordance with modern ordinance or laws. This would at least require additional building materials and may necessitate other soft costs associated with redesigning the building.
This is not the most expensive add-on you can get. Just to throw a few number out there I have a quote pulled up, premium is $1800, replacement cost is about $480k, taking the additional 10% ordinance or law coverage is only $70, and if I remember correctly the home is 1950s or so. Of course this could depend on many factors but it is not the most outrageous endorsement.