Ordinance or Law
Pays the extra cost of rebuilding to current building codes, not just back to how it was.
A standard homeowners policy pays to put the house back the way it was, using materials of like kind and quality. Building departments do not always allow that. Codes change, and a permit to repair often arrives with a requirement to bring part or all of the structure up to today's standard.
That extra cost is what ordinance or law coverage handles. It usually shows up in three pieces: the increased cost of construction from code upgrades, the cost of demolishing undamaged parts the code requires removed, and the lost value of those undamaged parts.
The upgrades are ordinary things that add up. Hardwired smoke alarms, updated wiring and panels, egress windows in bedrooms, hurricane straps and stronger roof decking in coastal states, elevated mechanical systems in flood zones, modern insulation. Older houses carry the most exposure, because the gap between when they were built and current code is widest.
Base forms exclude this cost in the exclusions section, then many add a limited amount back — often around 10 percent of Coverage A — as a built-in additional coverage. More is bought by endorsement, commonly at 25 or 50 percent. Some states require insurers to offer it. Amounts and wording vary by insurer and state.
There is a second trap. Some local rules — the 50 percent substantial damage rule used in many floodplain communities is the common example — require full code compliance once damage passes a set share of the building's value. A partial loss can cross that line and become a full rebuild, and the added cost sits outside an ordinary replacement cost settlement.
In real life
A 1961 ranch has a fire in the back half. Restoring what burned is bid at $118,000, which the policy pays less the deductible. Then the inspector requires the whole house rewired, bedroom windows enlarged to current egress size, and hardwired smoke alarms throughout — another $37,000 of work on parts that never burned. With only a built-in 10 percent allowance on a $260,000 dwelling limit, $26,000 of that is available and the last $11,000 is not.
Common questions
Does homeowners insurance pay to bring my house up to code?
Only in part. Standard policies pay to restore what was damaged, and the base form excludes the added cost of meeting current building codes. Many forms then add a limited amount back, commonly around 10 percent of the dwelling limit. Larger amounts come from an ordinance or law endorsement, often written at 25 or 50 percent. Some states require insurers to offer it.
What is ordinance or law coverage in homeowners insurance?
It is coverage for the extra cost created by building codes after a covered loss. It typically pays three things: upgrades required to rebuild to current code, demolition of undamaged portions the code requires removed, and the value of those undamaged portions. It applies only when the underlying damage was covered, and it stops at the amount shown on the policy.
How much ordinance or law coverage is typical?
Built-in amounts are commonly around 10 percent of the dwelling limit, and endorsements are commonly written at 25 or 50 percent. A $400,000 Coverage A with a 25 percent endorsement adds up to $100,000 for code-related costs. Which level fits a particular house is a decision for the homeowner and a licensed producer. The factual inputs are the age of the structure and how much local code has changed since it was built.
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Definitions describe how these terms are generally used across the U.S. market. Wording, limits and exclusions vary by insurer, policy form and state — the policy you hold is what controls. See the full Insurance Glossary.