Coverage explainer
Ordinance or law coverage: what it is, and why your default limit isn't enough.
When a covered loss forces a rebuild, current building codes apply — not the ones in effect when your house was built. Ordinance or law coverage pays that gap. Here's how to size it correctly.
The short version
Standard homeowners insurance (HO-3) only pays to restore your home to its prior condition. But you can't legally rebuild to 1978 code in 2025 — the contractor has to meet today's electrical, plumbing, energy, and structural requirements. Ordinance or law coverage fills that gap.
Most carriers include 10% of your dwelling limit by default. On an older home that's almost always too low.
Coverage A
Increased cost of construction to meet current code.
Coverage B
Demolition of undamaged portions required by code.
Coverage C
Lost value of undamaged structure forced to be torn down.
A real-world example
A 1972 ranch home in Denver has a kitchen fire. Damage is $90,000. But the contractor pulls permits and the city requires: arc-fault breakers throughout, code-compliant egress windows in the bedrooms, R-49 ceiling insulation, and a sprinkler line because the home exceeds the current footprint threshold. Code upgrades add $54,000 to the bill.
With 10% ordinance & law on a $400k dwelling limit, the homeowner has $40k to work with — $14k short. With 25%, they're fully covered. The endorsement upgrade cost ~$55/year.
Frequently asked
What is ordinance or law coverage on homeowners insurance?
Ordinance or law coverage pays the additional cost to rebuild or repair your home to comply with current building codes after a covered loss. Standard HO-3 policies only pay to restore the home to its prior condition — not to upgrade it to today's electrical, plumbing, or structural codes.
How much ordinance or law coverage do I need?
Most carriers include 10% of Coverage A by default. On an older home (built before 1990), 25%–50% is more realistic. A 1970s home with a partial loss can easily incur $40k–$80k of code-upgrade costs alone — new wiring, code-compliant framing, ADA-compliant fixtures, sprinklers, etc.
What does ordinance or law cover?
Three things: (1) the increased cost of construction to meet current codes, (2) demolition of undamaged portions of the structure required by code, and (3) the loss in value of the undamaged portion that must be torn down. Most policies bundle these as Coverage A, B, and C of the endorsement.
Is ordinance or law coverage worth it?
For any home over 20 years old: yes, almost always. The endorsement typically adds $30–$120/year and can prevent five- or six-figure out-of-pocket costs after a major claim. For new construction, the default 10% is usually enough.
Does ordinance or law coverage apply to total losses?
Yes — and that's when it matters most. After a total loss, the rebuild must meet current code. Energy codes, fire codes, hurricane straps, sprinklers in multi-story homes, and ADA-compliant bathrooms can add 10%–25% to the rebuild cost, all of which falls outside standard Coverage A.
Not sure what your limit is?
Upload your declarations page. We'll pull your ordinance & law limit and tell you whether it's appropriate for your home's age and rebuild cost.
Related reading
General information, not legal or financial advice. Coverage and limits vary by carrier and state.