Your homeowners insurance will cover the cost of replacing your windows with comparable models. It will not, however, cover the additional costs of upgrading the glass or purchasing shutters.

Ordinance or law coverage can be useful in this situation.

What is ordinance or law coverage?

Ordinance or law coverage is insurance that pays to bring your home up to code after a covered claim.

A homeowners policy is intended to assist you in restoring your home to its pre-damage condition, not to make improvements. So, if new building codes necessitate upgraded wiring or more wind-resistant roofing than you previously had, your policy's dwelling coverage is unlikely to cover those costs. Ordinance or law coverage may be able to fill the void.

Ordinance or law coverage may be included in your homeowners insurance policy, but you can often purchase more as an add-on to your policy.

What does ordinance or law insurance cover?

Ordinance or law coverage pays for three major categories of expenses that may be triggered by local building codes.

Updating a damaged part of your home

As previously stated, ordinance or law coverage can pay for unexpected upgrades while you repair a damaged part of your home.

Example: Dinner goes very, very wrong one night, and your kitchen catches fire. The pipes to the kitchen sink, for example, are damaged, and a contractor tells you that your plumbing is years old. Ordinance or law coverage may cover the necessary updates, up to the limit of your policy.

Rebuilding or updating an undamaged part of your home

In some cases, building code updates may necessitate changes to parts of your home that did not sustain damage. Ordinance or law coverage can also be beneficial in this regard.

Example: Imagine that a more severe fire spreads through multiple rooms before firefighters get it under control. In some parts of the United States, a house that is more than 50% damaged must be demolished rather than repaired. However, your homeowners insurance will usually only cover the cost of rebuilding the damaged portion of your home. You'd have to pay for the rest of the rebuild yourself if you didn't have ordinance or law coverage.

Here's another one. Assume you file a claim for water damage as a result of a burst pipe. Your home's knob-and-tube wiring needs to be replaced, both in the room where the pipe burst and throughout the house. A standard homeowners policy is unlikely to cover wiring in the undamaged portion of your home, but ordinance or law coverage will.

Demolition

If a covered disaster destroys your home, your homeowners insurance may pay to have the debris removed so you can rebuild. However, suppose your house is only partially damaged and local law requires you to demolish the rest of it. In that case, ordinance or law coverage may be required to cover the full cost of demolition and debris removal.

Do you need ordinance or law coverage?

Because building codes and other local regulations change on a regular basis, having ordinance or law coverage is something that every homeowner should consider.

Check your homeowners policy or contact your insurance agent to see if you already have some coverage. Ordinance or law insurance, for example, may cover up to 10% of your dwelling coverage limit. So, if your home's structure is insured up to $250,000, you'd have $25,000 to put toward local code and law compliance.

However, the higher you want this limit to be, the older your home. Have you updated your wiring, plumbing, or heating and cooling systems in the last few decades? If this is the case, your home may be significantly out of compliance with current regulations. If something goes wrong, you might be thankful for a generous ordinance or law limit that allows you to make the necessary changes.