Can a homeowners claim be denied for lack of a building permit?
Could an insurer deny a homeowners policy claim for damage caused by a condition in improvements made to the home for which the homeowner neglected to get the proper building permits? The typical homeowners insurance policy does not exclude coverage for dwellings, or their upgrades or improvements, that have not been built according to current building code. However, recovery is limited to the value of the damaged property, not the value of property as it should have been built according to code. Nevertheless, most policies will provide some limited additional coverage (usually 10 percent of the dwelling limit) for costs that are incurred due to the enforcement of a building ordinance or law. Also, an insurer may be willing to increase this ordinance or law coverage limit for additional premium.
A dwelling, and its upgrades and improvements, that are known to be built out of compliance with the current building code, and are deemed to be unsafe, could become an underwriting issue; meaning, the insurer may refuse to renew the policy if the home is not first brought up to code.