Ordinance or Law Coverage

Example

“After the fire, Mike discovered his standard homeowners policy wouldn't cover the $15,000 needed to upgrade his electrical system to current code, but fortunately he had purchased ordinance or law coverage.”

Memory Tip

Remember 'OLD house, NEW rules' - when you rebuild an old house, you must follow new building codes, and this coverage pays for those expensive upgrades.

Why It Matters

Building codes constantly evolve to improve safety, and older homes often don't meet current standards. Without this coverage, homeowners can face thousands in unexpected costs to bring repairs up to code, potentially making rebuilding financially impossible.

Common Misconception

Many homeowners believe their standard policy covers all rebuilding costs, not realizing that code upgrade expenses are excluded. Some also think this coverage is automatically included or that it covers cosmetic upgrades, when it only covers mandatory code compliance costs.

In Practice

Lisa's 1970s home suffers $80,000 in storm damage. Her standard policy covers rebuilding the damaged portions, but current building codes now require upgraded windows, insulation, and HVAC systems that weren't required when her home was built. These code upgrades add an extra $25,000 to the rebuild cost. With ordinance or law coverage, her insurer pays this additional amount, but without it, Lisa would have to pay the $25,000 out of pocket or potentially abandon the rebuild project.

Etymology

The term derives from 'ordinance,' from Old French 'ordenance' meaning 'arrangement or decree,' referring to local building regulations that property owners must follow when making repairs or rebuilding.

Common Misspellings

Related Terms

More in insurance

Other insurance terms you should know

See Also