Updated January 26, 20223 min read
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Ordinance or law coverage is a homeowners insurance protection that helps cover the cost of getting your house up to code after a covered loss. In other words, if a portion of your house burns down and a city ordinance requires it to be rebuilt a certain way, ordinance or law coverage can pay the increased cost of complying with these rules.
Ordinance or law coverage pays the extra cost of getting your home up to code after a covered loss. This includes home construction, demolition, remodeling, and renovations.
Without ordinance or law coverage, you’d have to pay these additional costs out of your own pocket.
While it’s typically included as an additional coverage in standard homeowners insurance, policies come with a fairly low ordinance or law coverage limit — generally around 10% of your home’s coverage amount.
Most insurance companies offer ordinance or law endorsements, or add-ons, that can increase this limit to 25% or 50%.
Your city, county, or state generally has building codes, or rules around how buildings or homes must be built. The point of these is to ensure structures are constructed, remodeled, and maintained in a way that will guarantee everybody’s safety.
Since we’re constantly finding out new ways to succeed and fail at constructing things, building codes have a tendency to change. These changes impact not just commercial establishments, but residential homes, too. Some examples of building code updates that affect home construction cost include:
Upgraded plumbing and electrical wiring
New HVAC systems
Fire or weather-resistant structural upgrades
Additional means of egress and evacuation
Reduced open spaces
That means if your house is badly damaged in a storm and requires extensive repairs, your local building code may require that the damaged portion be rebuilt according to these standards. It may even require you to demolish your house and rebuild the entire thing from scratch. But what happens when homeowners insurance doesn’t cover these additional construction costs? This is where ordinance or law coverage comes into play.
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If your home is damaged by a covered peril and it needs to be repaired or remodeled to comply with building codes, ordinance or law coverage kicks in to pay for the additional construction costs required to satisfy these requirements. This coverage covers building ordinance or law enforcement in three ways:
It covers the cost of any government-required demolition, reconstruction, remodeling, renovation, or repairs to the section of your house that was damaged by a covered loss.
In the event your house is required to be totally demolished because of covered damages to another part of the home, it covers the cost of demolition or reconstruction of the part of your house that wasn’t damaged.
It covers the cost of remodeling, removing, or replacing a portion of the undamaged part of your house in order to complete construction or repairs to the damaged portion of your house.
Ordinance or law coverage example
Imagine your home’s pool enclosure was destroyed during a catastrophic windstorm. Wind is a covered home insurance peril, so your homeowners insurance should cover the full cost of a new enclosure right? Well, not so fast.
Your local government recently established new rules dictating how attached structures — including pool enclosures — must be rebuilt after a loss. Only one problem, the new building code requires the walls of the enclosure to be constructed with hurricane resistant beams and walls — costing around $10,000 more than your old one.
If you didn’t have ordinance or law coverage, you’d have to pay thousands of dollars out of pocket to cover those upgrades. But since this coverage is included in homeowners insurance policies in most states, that’s a scenario you likely won’t have to worry about.
Ordinance or law coverage is typically included in homeowners insurance policies up to a limited amount — generally 10% of your home’s dwelling coverage limit. This means if your home is insured for $350,000, you’d have up to $35,000 in building ordinance or law coverage.
Higher coverage limits may also be added via a coverage endorsement. Most insurers offer additional ordinance or law protection limits of 25% and 50%.
Higher ordinance or law coverage limits are recommended if you live in an area with strict zoning and land development regulations. You should also consider additional coverage if you own an older home that isn’t built to today’s standards.
In certain states, like Florida, you’re required to demolish your house if more than 50% of the structure is damaged.
That means if 55% of your home is damaged by a covered loss and you’re forced to demolish it, home insurance will cover rebuild costs for the 55% of the home that was damaged. However, it won’t pay to demolish the house or rebuild the 45% that wasn't part of the initial loss, and the standard 10% ordinance or law limit likely won’t be high enough to cover these costs.
For that reason, you’ll want to make sure you have a minimum of 25% or 50% ordinance or law coverage if you live in Florida or another state with uncompromising building codes.
If you live in an old home, it’s likely your state or city’s building code has been updated once or twice since it was initially built. That means if a portion of your home is damaged, any renovations or repairs will need to be up to code.
Things like flood elevation requirements, upgraded plumbing or electrical, wind-resistant windows and doors, and other features may be required as part of the revised building ordinance. If your house is north of 50 or 60 years old and you already live in an area with tough building codes, you’ll want the maximum amount of ordinance or law coverage.