Property · Insurance Term
Ordinance or Law Coverage (Building Ordinance Coverage)
Definition
Ordinance or law coverage pays added costs that building codes and other laws impose after a covered loss, such as tearing down undamaged parts of a building or rebuilding to current code. Standard property policies generally exclude these costs, so it is added by endorsement.
In Plain English
When an older building is damaged, local rules may require more than a simple repair. The standard property form generally pays to restore what was there. Ordinance or law coverage, commonly added with the CP 04 05 Ordinance or Law Coverage endorsement, fills the gap.
It has three common parts. 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 demolish and clear them. Coverage C, increased cost of construction, pays the extra cost to rebuild to current code.
Limits for B and C are often a percentage of the building limit or a set dollar amount, and some policies combine them. Older buildings usually need more. Many lender insurance requirements call for ordinance or law coverage.
Not sure how your policy handles this? Have us review it, or get a quote.
Example
Hypothetical: a fire damages half of a 1980s hotel, and the city requires the rest to be demolished and the rebuild to meet current code. Coverage A pays for the undamaged half's value, Coverage B pays $150,000 to demolish it, and Coverage C pays $400,000 in code upgrades, each up to its limit.
Why It Matters for Texas Property Owners
Building codes and windstorm construction standards have changed over time in many Texas cities and coastal areas. For TWIA eligibility, structures built, altered or repaired since 1988 generally need a windstorm certificate of compliance, so rebuilding on the coast can add code and inspection steps. Ask your agent whether your Coverage C limit is realistic for your area.
What to Watch For
- Check whether you have Coverages A, B and C, and what each limit is.
- Ask whether B and C limits are separate or combined.
- Give older buildings higher limits, especially those 20 or more years old.
- Confirm the coverage meets your lender's requirements.
Common Questions
Doesn't my property policy already pay to rebuild to code?
Usually not in full. Standard forms generally exclude most code-driven costs, and ordinance or law coverage adds them back up to set limits.
How much ordinance or law coverage do I need?
It depends on your building's age, construction and local codes. A contractor or appraiser can help estimate code upgrade costs, and lenders sometimes set minimums.
Sources
Last updated October 14, 2026 · Primesure editorial team · How We Write