This type of insurance protects property owners from financial losses incurred due to the increased costs of repairing or rebuilding a structure to comply with current building codes or local regulations after a covered loss. For example, if a fire damages a building, and current codes require more stringent safety features than were in place when the building was originally constructed, this coverage can help pay for those upgrades.
It is vital because building codes frequently change, often becoming more demanding. Without this protection, owners could face significant out-of-pocket expenses when forced to upgrade their property to meet these new standards following a covered loss. Historically, older policies often did not include this protection, leaving owners vulnerable to substantial unexpected costs. Its inclusion is now more common, reflecting an understanding of the financial burden imposed by evolving building regulations.
