Property · Insurance Term
Increased Cost of Construction (Ordinance or Law Coverage C)
Definition
Increased cost of construction is the part of ordinance or law coverage that pays the extra cost of rebuilding a damaged building to meet current building codes. It is often called Coverage C. A standard property policy generally does not pay for these code upgrades without it.
In Plain English
When an older building is damaged, the city may require the repair to meet today's codes. That can mean fire sprinklers, accessibility features, stronger roof tie-downs or new electrical service. A standard property policy usually pays to restore what you had, not what code now requires. Coverage C pays the difference, up to its limit.
It is one of three common parts of ordinance or law coverage. Coverage A, loss to undamaged portion, pays for the value of undamaged parts that must be torn down. Coverage B, demolition cost coverage, pays to tear down and clear them. Coverage C then pays the extra cost to rebuild to code.
Policies commonly pay Coverage C only when the building is actually repaired or rebuilt, and only for upgrades the law requires. Limits are often a percentage of the building limit or a set dollar amount. Older buildings usually need higher limits.
Not sure how your policy handles this? Have us review it, or get a quote.
Example
Hypothetical: a fire damages a 1970s strip center. Repairs to the old design would cost $800,000, but current code adds $200,000 for sprinklers and accessibility work. If Coverage C has a $250,000 limit, it may pay the $200,000 in code upgrades once the work is done.
Why It Matters for Texas Property Owners
The National Flood Insurance Program uses the same initials for a different coverage, Increased Cost of Compliance. It can pay up to $30,000 toward flood-related upgrades, such as elevation, when a community finds a flood-damaged building substantially damaged (or, in some communities, repeatedly damaged). It is separate from the code coverage on your property policy.
What to Watch For
- Ask whether your policy includes Coverage C and what its limit is.
- Get a sense of how far your building is from current code, especially if it is 20 or more years old.
- Check whether the limit is shared with Coverages A and B or stands alone.
- Ask your lender whether its requirements specify ordinance or law limits.
Sources
Last updated October 14, 2026 · Primesure editorial team · How We Write