What Is Ordinance and Law Coverage in an Insurance Policy

What Ordinance and Law Coverage Actually Means

Ordinance and Law coverage is a part of your insurance policy that pays for upgrades required by current building codes.

It applies when your home is damaged and repairs must meet today’s regulations, not the standards that existed when the home was originally built.

For example, if your home was built 30 years ago, building codes have likely changed. When repairs are made after a loss, those repairs must follow current code requirements.

That additional cost is what Ordinance and Law coverage is designed to pay for.

Why This Coverage Exists

Insurance policies are designed to restore your home to its pre-loss condition.

However, building codes do not allow you to rebuild using outdated standards.

This creates a gap between:

• What your home was

• What it must become after repairs

Ordinance and Law coverage fills that gap by covering the increased cost required to comply with current codes.

Without it, homeowners may have to pay out of pocket to meet legal requirements.

This is a key part of understanding how insurance policies actually work during repairs.

The Three Parts of Ordinance and Law Coverage

Ordinance and Law coverage is typically divided into three separate areas:

Coverage A – Loss to the Undamaged Portion

If part of your home is damaged and building code requires additional demolition, this coverage pays for the portion that was not originally damaged but must be removed.

Coverage B – Demolition Costs

This pays for tearing down parts of the structure that must be removed due to code requirements, even if they were not directly damaged.

Coverage C – Increased Cost of Construction

This covers the cost to rebuild using current building codes, including upgrades such as electrical, framing, or safety requirements.

These categories are often misunderstood, which leads to confusion during the insurance claim process for structural repairs.

Where Homeowners Get Caught Off Guard

Most homeowners do not realize that Ordinance and Law coverage has its own limit.

It is not unlimited, and it is not always included in full under your main dwelling coverage.

In many policies, it is set as a percentage of Coverage A or as a fixed dollar amount.

Once that limit is used, no additional funds are available under that portion of the policy.

This becomes critical in larger losses where policy limits in insurance claims are already being pushed.

How It Impacts Real Claims

During a claim, the way work is categorized determines which part of the policy pays for it.

Some costs may be considered direct damage, while others may be considered code upgrades.

That distinction matters.

If work is classified under Ordinance and Law instead of Coverage A, it uses a separate limit.

Once that limit is exhausted, those costs do not shift back to building coverage.

This is why how claim costs are allocated across coverages can completely change the outcome of a claim.

Example of How This Plays Out

In many fire and water losses, materials like drywall, insulation, or wiring must be removed and replaced.

If those materials contain outdated components or do not meet current code, the replacement may require upgrades.

Those upgrades are often categorized under Ordinance and Law coverage.

If the required upgrades are extensive, that portion of the policy can be used up quickly.

At that point, the homeowner may face a situation where:

• The damage is covered

• The upgrades are required

• But the coverage for those upgrades is limited

This is where claims begin to fall short of full reconstruction costs.

Why This Matters Before and During a Claim

Most homeowners only learn about Ordinance and Law coverage after a loss occurs.

By then, the policy limits are already set.

Understanding this coverage before a claim allows homeowners to:

• Review their limits

• Adjust coverage if needed

• Avoid unexpected gaps during repairs

During a claim, it becomes equally important to understand how costs are being categorized and applied.

This is a major factor in why insurance claims run out of money before repairs are complete.

The Key Takeaway

Ordinance and Law coverage is not just an extra feature in your policy.

It directly affects how much of your claim is paid and how repairs are completed.

The classification of work between building coverage and code-required upgrades can determine whether your project stays within limits or exceeds them.

Knowing how this coverage works gives homeowners a clearer understanding of what is happening during their claim — and why certain costs are handled differently.

If you still have questions about your claim, visit our Homeowners Insurance Claim FAQs page for quick answers and links to detailed guides.

Learn More At ClaimHelpMe.com

This page explains the basics of how this part of the insurance claim process works.

However, inside ClaimHelpMe.com, homeowners can access real repair estimates, detailed examples, and step-by-step explanations showing how claims are documented, evaluated, and presented to insurance carriers.

The free content explains the fundamentals.
The ClaimHelpMe platform shows how the process actually works.

Explore more homeowner insurance claim guides in our Claim Guides section.

About The Author

Mark Grossman is a Licensed Public Adjuster and NASCLA Certified Contractor with 28 years in the restoration insurance industry and 35 years in construction.

Learn more → Mark Grossman