Ordinance or Law Coverage: The Code-Upgrade Gap Most Homeowners Miss

Ordinance or law coverage (also called building code upgrade coverage) helps pay the extra cost to repair or rebuild to current building codes after a covered loss—costs that standard homeowners coverage often doesn’t pay unless you have this coverage built in or added by endorsement.¹

Key takeaways

• It’s about code compliance after a covered claim—not elective remodeling.²
• Limits are commonly a % of Coverage A (example options like 10% or 25%), but your declarations page controls.²
• Partial losses can trigger big upgrade bills when permits are pulled (and some areas use “damage threshold” rules that push larger rebuild requirements).³

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1) What ordinance or law coverage is (plain English)

When you repair after a covered loss, the building department may require upgrades to meet today’s codes. Ordinance or law coverage is designed to help pay those additional costs caused by enforcement of codes/ordinances that didn’t exist when your home was built.¹

Important: Labels vary by insurer. You might see “Ordinance or Law,” “Building Code,” “Code Upgrade,” or “Increased Cost of Construction.” Always judge it by the form wording and the limit shown on your declarations page.

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2) What it can pay for (the 3 buckets that show up in real claims)

Exact wording differs, but code-upgrade costs usually land in these buckets:

A) Required demolition (more than the obvious damage)

If the city/county requires you to remove more than the visibly damaged area (or requires teardown once damage crosses a threshold), ordinance or law coverage may help with the extra demolition cost that goes beyond normal repair.³

B) Extra debris removal/disposal tied to code-required work

More demolition usually means more haul-off and disposal. Some policy forms treat this inside ordinance/law coverage, others handle it elsewhere—so confirm your form’s wording and any sub-limits.

C) Increased cost of construction (the biggest bill)

This is the “bring it up to code” money—extra cost to rebuild using current code requirements (electrical, HVAC, insulation/ventilation, safety items, structural connectors, etc.).²

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3) Why it hits hardest on older homes (and partial losses)

Codes change. Older homes are more likely to trigger upgrades once walls/ceilings are opened and permits are pulled. Even a partial loss can trigger requirements that increase scope and cost.³

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4) When it applies (and when it usually doesn’t)

Usually applies when:

• There is a covered loss, and
• Repairs/rebuild require permits, and
• The building authority requires code compliance as part of permitted repairs.

Usually does not apply to:

• Elective upgrades (“since we’re already remodeling…”), routine maintenance, or wear-and-tear.
• Code changes with no covered claim triggering repairs.
• Costs unrelated to code enforcement.

Insurer guidance commonly frames this coverage as helping with code-required upgrades after a covered peril, and not covering routine renovations or maintenance.²

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5) How much ordinance or law coverage do you need?

Many insurers set the limit as a percentage of Coverage A (dwelling)—often shown as options like 10% or 25% (varies by insurer, state, and form).²

Some homeowners forms also provide a small amount of “additional insurance” for ordinance or law, commonly described as 10% of Coverage A in many reviewed forms—however, this is not universal, and endorsements can increase the amount.⁴

Fast sizing check (10 minutes)

1. Open your Declarations page and find your ordinance/law limit (or confirm it’s not included).
2. Ask: “If one major area is heavily damaged, what could forced upgrades cost in my area?”
3. If your home is older or local codes are strict, price higher limits (example: 10% → 20%/25% where available).

Coverage A (Dwelling)	10% Limit	25% Limit
$400,000	$40,000	$100,000
$600,000	$60,000	$150,000

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6) What to document during a claim (so it actually pays)

If code upgrades appear during repairs, your adjuster typically needs a clean separation between “direct damage repair” and “code-required upgrades.”

• Permit notes / correction notices (what the building department required).
• Contractor estimate split into two lines:
  • Repair what was damaged (base scope)
  • Code-required upgrades (ordinance/law scope)
• Photos of opened walls/affected systems when upgrades are required.
• Invoices/receipts for code-required materials and labor.

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7) How to find it in your policy (search terms)

Open your policy PDF and search:

• Ordinance or Law
• Building Code
• Increased Cost of Construction
• Demolition
• Debris Removal

Then check your Declarations page for the limit (percentage or dollar amount) and whether it’s built-in or added by endorsement.

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8) Questions to ask your insurer or agent (copy/paste)

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FAQ

Is ordinance or law coverage the same as a home warranty?

No. It applies after a covered insurance loss and helps with code-required extra costs—subject to your policy wording and limit.

Does homeowners insurance automatically pay for code upgrades?

Often no. Consumer and insurer guidance commonly warns that standard policies generally won’t pay the extra cost to bring a home up to current building codes unless ordinance or law coverage applies.⁵

Can I add it later?

Often yes—as an endorsement—depending on insurer and state rules. Ask what limits are available for your policy form.²

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References

1. NAIC. A Shopping Tool for Homeowners Insurance (definition: ordinance or law coverage pays extra cost to rebuild to meet new/updated codes).
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2. Progressive. “What Is Ordinance or Law Coverage?” (how it works; often not included; commonly a % of dwelling; doesn’t cover routine renovations/maintenance).
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3. IRMI. “ordinance or law coverage” (definition; notes many communities use damage thresholds such as 50% requiring rebuild to current codes).
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4. IRMI. “Homeowners Law and Ordinance Coverage Challenges” (example discussion: additional insurance often described as 10% of Coverage A in many reviewed forms; varies by form and insurer).
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5. Insurance Information Institute (III). “How much homeowners insurance do I need?” (notes homeowners policies generally won’t pay extra expense to rebuild to newer codes; ordinance or law endorsement can help pay).
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Disclosure: Educational only. Coverage, exclusions, and limits vary by insurer, state, and policy form. Always confirm your declarations page and endorsement wording.