By-law

What Does By-law Mean?

A by-law is a law, rule, or regulation established by a corporation, local government, or other organization. In the context of insurance, certain by-laws can impact the value of insurance claims. To help policyholders safeguard against these risks, many insurers offer by-law endorsements.

Insuranceopedia Explains By-law

By-laws can sometimes impact insurance coverage. For instance, if someone owns an older car that gets only 10 miles per gallon and it’s totaled in an accident, a by-law might require new cars to achieve at least 25 miles per gallon. In such a case, the auto insurance may not cover the full cost of a newer model that meets this standard. This is one of the situations where it helps to know what happens when a car is totaled, since the insurance settlement is based on the vehicle’s value rather than the cost of a replacement that meets current rules. Without a by-law endorsement, the person might have to pay the difference between what the insurance covers and the cost of a vehicle that complies with the by-law. This kind of payout gap is also part of why drivers with older vehicles sometimes ask whether collision and comprehensive insurance still make sense on an old car.