Rebuilding a damaged home is not always as simple as replacing the materials that were there before the loss. If your home is older, local building codes may have changed since it was originally constructed. After a major covered loss, your city or county may require parts of the home to be upgraded to meet current building standards before reconstruction can be completed.
Those additional costs are where ordinance or law coverage can become important. Ordinance or law coverage is an optional coverage or endorsement that can help pay certain additional costs required to repair, rebuild, or replace a damaged property so that it complies with current building codes or laws, subject to the policy’s terms and limits. The National Association of Insurance Commissioners (NAIC) describes this coverage as an endorsement for extra expenses caused by building codes and ordinances that did not exist when the home was originally built.
This guide explains what ordinance or law coverage is, why it matters, what it may cover, what it generally does not cover, and what homeowners should check in their insurance policy.
What Is Ordinance or Law Coverage?
Ordinance or law coverage is insurance protection designed to address certain additional costs that can arise when a damaged home must be repaired or rebuilt according to current building codes or local laws. Building requirements can change over time. A home constructed many years ago may have been legal under the rules that existed when it was built, but rebuilding the same home today may require upgrades under current regulations. For example, a local government may require updated electrical wiring, plumbing, roofing materials, structural components, or other improvements during reconstruction. A standard Homeowners Policy may not automatically pay the additional cost of bringing an older structure up to current code. Ordinance or law coverage can provide additional protection when the policy includes it and the loss qualifies.
Why Is It Called Ordinance or Law Coverage?
The name comes from the types of requirements that can trigger the additional expense. Depending on the jurisdiction, the requirements may come from:
- Building codes
- Local ordinances
- Construction regulations
- Safety requirements
- Other applicable laws or regulations
The exact coverage depends on the wording of your policy and the requirements that apply to your property.
Why Do Homeowners Need Ordinance or Law Coverage?
Building codes are not static. Communities update construction requirements over time to address safety, structural integrity, energy efficiency, accessibility, fire protection, and other concerns. That creates a potential insurance issue for older homes. Imagine a house built 30 years ago suffers severe damage from a covered fire. The original electrical system may have complied with the code at the time of construction. However, local authorities may require modern electrical standards when the damaged portion of the house is rebuilt. The cost of the required upgrade could be higher than simply replacing the old system with an identical one. That difference is one of the reasons homeowners may consider ordinance or law coverage.
What Does Ordinance or Law Coverage Cover?
Coverage varies by insurer and policy, but ordinance or law coverage may help with certain additional expenses associated with complying with current building requirements after a covered loss. Depending on the policy, this may involve costs related to:
- Electrical system upgrades
- Plumbing requirements
- Roofing requirements
- Structural improvements
- Safety-related construction changes
- Accessibility requirements
- Demolition of undamaged portions of a structure when required by law
- Debris removal or rebuilding expenses connected with code compliance
Not every policy covers all of these expenses, so homeowners should review the specific endorsement rather than relying on a general description.
Electrical Upgrades
An older home may have an electrical system that was acceptable when it was constructed but no longer meets current requirements. If a covered loss triggers a requirement to update the electrical system during reconstruction, ordinance or law coverage may help with the qualifying additional expense if the policy provides that protection.
Plumbing Upgrades
Local regulations may require certain plumbing standards when a damaged portion of an older property is rebuilt. The additional cost of complying with those requirements can be different from the cost of simply replacing the damaged plumbing with the same older materials or design.
Roofing Requirements
Building regulations can also affect roofing materials and installation methods. After a covered roof loss, local rules may require a particular type of roofing material or installation standard that costs more than the original roof. Whether ordinance or law coverage applies depends on the policy and the specific requirement.
What Is an Example of Ordinance or Law Coverage?
Consider an older home with a roof that was originally installed under building requirements that are no longer in effect. A severe covered storm damages enough of the roof that reconstruction is required. When the homeowner applies for a building permit, the local authority requires the replacement roof to comply with current code requirements. Suppose rebuilding the roof to its previous specifications would cost $15,000, while meeting the current code adds another $5,000.
The $5,000 is an example of the type of additional expense ordinance or law coverage may be designed to address, subject to the policy’s limit, deductible, exclusions, and conditions. Without applicable ordinance or law coverage, the homeowner may have to pay some or all of that additional code-related expense personally.
Does Standard Homeowners Insurance Cover Building Code Upgrades?
Do not assume that your standard dwelling coverage automatically pays every cost associated with current building codes. The NAIC’s consumer claims guidance states that standard homeowners policies generally do not cover the added expense required to bring a home into compliance with current building codes, while ordinance and law coverage can provide protection for some of those costs. This is why checking the declarations page and endorsements on your policy is important.
Coverage Depends on Your Policy
Insurance policies differ. Some homeowners may have ordinance or law coverage included or available as an endorsement. Others may have limited coverage or no additional coverage for certain code-related expenses. Your policy documents determine what applies to your home.
Ordinance or Law Coverage vs. Dwelling Coverage
These coverages address different parts of a rebuilding situation.
| Dwelling Coverage | Ordinance or Law Coverage |
|---|---|
| Generally covers the insured home’s physical structure for covered losses | May cover certain additional costs caused by current building codes or laws |
| Often identified as Coverage A | Often provided through an endorsement or additional coverage |
| Addresses covered damage to the dwelling | Addresses qualifying code-compliance expenses |
| Subject to the dwelling limit and policy provisions | Subject to its own limits and policy provisions |
For more information about the main structure of your home, read our guide to dwelling coverage in homeowners insurance.
Does Ordinance or Law Coverage Pay for a Completely New Home?
Not necessarily. Ordinance or law coverage is not simply a second homeowners policy that pays for everything involved in rebuilding. It is generally designed to address qualifying additional costs associated with compliance with applicable laws or building requirements after a covered loss. The underlying dwelling coverage and any other applicable coverages still matter.
Does Ordinance or Law Coverage Apply to Partial Damage?
It can, depending on the policy and circumstances. A property does not necessarily have to be completely destroyed before building-code requirements become relevant. For example, a partial loss may require a damaged portion of an older structure to be rebuilt according to current requirements. Some jurisdictions may also require additional portions of the property to be upgraded or demolished when a certain percentage of the structure is damaged. The exact rules vary by location, so the applicable local building authority and insurance policy both matter.
What Is the Difference Between Ordinance or Law Coverage and Replacement Cost?
Replacement cost and ordinance or law coverage solve different problems.
Replacement cost generally refers to the cost of repairing or replacing covered property without deducting depreciation, subject to the policy terms.
Ordinance or law coverage can address certain additional expenses created by current building codes or laws.
For example, replacing a damaged roof with comparable materials can be a replacement-cost issue. If local law requires an upgraded roofing system that costs more, the additional code-related amount may involve ordinance or law coverage. For a deeper explanation of replacement cost and actual cash value, see our article on actual cash value vs. replacement cost.
What Does Ordinance or Law Coverage Not Cover?
Ordinance or law coverage has limits and exclusions just like other insurance coverages. It generally should not be treated as unlimited protection for every construction expense.
Normal Home Improvements
If you decide to remodel your kitchen or upgrade your electrical system before any covered loss occurs, ordinance or law coverage is generally not a substitute for paying for voluntary improvements. The coverage is generally connected to qualifying expenses resulting from a covered loss and applicable legal or code requirements.
Excluded Causes of Loss
If the underlying damage is caused by something your policy excludes, ordinance or law coverage may not create coverage for the original loss. For example, adding ordinance or law coverage does not automatically make flood or earthquake damage covered under a standard homeowners policy. NAIC notes that flood and earthquake coverage are generally separate from standard homeowners insurance.
Expenses Above the Coverage Limit
Even when a code-related expense qualifies, the policy may impose a specific limit. If the additional cost exceeds that limit, the homeowner may still be responsible for the difference.
How Much Ordinance or Law Coverage Do You Need?
There is no single amount that works for every home. The appropriate amount can depend on factors such as:
- The age of the home
- Local building codes
- The home’s construction type
- Whether the property has undergone previous renovations
- Local rebuilding requirements
- The potential cost of code-related upgrades
- The limits available from your insurer
Older Homes May Require More Attention
An older home may have a greater difference between the standards that applied when it was built and the requirements that apply today. That does not automatically mean an older home needs a specific amount of ordinance or law coverage, but it can make the subject worth discussing with your insurer.
Ask About Coverage Limits
Ask your insurance company or licensed insurance professional:
- Do I have ordinance or law coverage?
- What is the coverage limit?
- Is it included or an endorsement?
- What types of code-related expenses qualify?
- Does it cover demolition of undamaged portions?
- What deductible applies?
- Are there exclusions or sublimit?
Where Can You Find Ordinance or Law Coverage in Your Policy?
Start with your policy’s declarations page. The declarations page typically identifies the coverages, limits, premium, property address, and applicable endorsements. The NAIC recommends reviewing the declarations page and policy provisions carefully because endorsements can modify the basic coverage provided by the policy.
Look for wording such as:
- Ordinance or Law
- Ordinance and Law
- Building Ordinance or Law
- Building Code Coverage
- Code Upgrade Coverage
The terminology can vary between insurers.
What Should You Do After a Covered Loss?
If your home suffers major damage, contact your insurer promptly and follow the claim instructions provided by the company. If local officials require repairs or reconstruction to meet current codes, keep copies of relevant documents.
Keep Building Department Records
Depending on the situation, useful records may include:
- Building permits
- Inspection reports
- Code notices
- Written requirements from local officials
- Contractor estimates
- Invoices
- Architect or engineer documents
- Photos of the damage
These documents can help establish what work is required and why the additional expense occurred.
Do Not Start Major Reconstruction Without Understanding the Requirements
Before beginning major reconstruction, understand what your insurer and local authorities require. Ask questions about permits, inspections, code requirements, contractor estimates, and the applicable insurance coverage.
Why Building Codes Matter During Reconstruction
Building codes are intended to establish minimum requirements for construction and safety. FEMA explains that current building codes can improve the safety and resilience of homes and communities and help reduce property losses from hazards. That means code upgrades after a disaster are not necessarily optional improvements. In some circumstances, they can be requirements for obtaining permits or completing reconstruction. The financial question for a homeowner is therefore not only how much it costs to replace the damaged property, but also whether current requirements add additional construction costs.
Common Mistakes Homeowners Make With Ordinance or Law Coverage
Assuming Dwelling Coverage Includes Every Code Upgrade
Dwelling coverage and ordinance or law coverage can address different expenses. Review both rather than assuming one automatically covers everything.
Never Checking the Endorsements
Endorsements can change or add coverage. Review your declarations page and policy documents to see what applies to your home.
Ignoring Local Building Requirements
Insurance coverage and local construction requirements are separate issues. A claim may involve both the insurance company and local building authorities.
Assuming Older Homes Are Automatically Covered for Code Upgrades
An older home may face greater code differences, but age alone does not determine whether ordinance or law coverage exists. The policy wording and applicable local requirements matter.
Choosing a Coverage Limit Without Asking Questions
Ask how the limit was determined and what types of expenses it can address.
Frequently Asked Questions About Ordinance or Law Coverage
What is ordinance or law coverage in homeowners insurance?
It is coverage designed to help with certain additional costs required to repair or rebuild a damaged property according to current building codes, ordinances, or laws, subject to the policy’s terms and limits.
Is ordinance or law coverage included in every homeowners policy?
Coverage varies by insurer and policy. It may be included in some policies or available as an endorsement or additional coverage.
Does ordinance or law coverage pay for building-code upgrades?
It can provide coverage for qualifying additional expenses required by current building codes or laws after a covered loss, subject to the policy.
Does ordinance or law coverage apply to older homes?
It can be particularly relevant when an older home must be rebuilt under newer building requirements, but the policy and local regulations determine whether coverage applies.
Does ordinance or law coverage pay for remodeling?
It is not generally intended to pay for voluntary remodeling or improvements. It is generally associated with qualifying additional expenses resulting from a covered loss and applicable requirements.
Does ordinance or law coverage cover flood-related building upgrades?
Not automatically. Standard homeowners insurance generally does not cover flood damage, and ordinance or law coverage does not by itself remove the underlying flood exclusion.
Does ordinance or law coverage have a limit?
Yes. The policy can specify a coverage limit or percentage, along with other conditions and exclusions.
How do I know if I have ordinance or law coverage?
Check your declarations page and endorsements, then ask your insurer or licensed insurance professional to explain the applicable coverage and limit.
Is ordinance or law coverage the same as replacement cost?
No. Replacement cost generally concerns the cost to repair or replace covered property without depreciation, while ordinance or law coverage addresses certain additional costs associated with current building requirements.
How PolicyHelpUSA Can Help
Homeowners insurance can contain several different coverages, limits, exclusions, and endorsements, and understanding how they work together can make it easier to review your policy. At PolicyHelpUSA, we create practical U.S. insurance guides that explain homeowners insurance topics in straightforward language.
