Imagine this: a kitchen fire damages part of your home, and your insurance adjuster delivers unexpected news. Yes, your policy will cover the fire damage—but when the contractor starts repairs, local building codes now require updated electrical wiring throughout the entire house. Your home was built in 1985, and the codes have changed three times since then. The difference? An extra $45,000 you'll need to pay out of pocket. Unless you have building code coverage.
Here's what most homeowners don't realize: your standard home insurance policy covers rebuilding what was damaged, but it doesn't cover bringing your home up to modern building codes. That gap can cost you tens of thousands—or even hundreds of thousands—of dollars. Let's break down what building code coverage is, why you need it, and how to make sure you're protected.
What Is Building Code Coverage?
Building code coverage—also called ordinance or law coverage—is an add-on to your homeowners insurance that covers the extra costs of complying with current building codes when you repair or rebuild after a covered loss. Think of it as insurance for the difference between what your home was and what local laws now require it to be.
Your standard homeowners policy will replace what was damaged—if your roof burns, it pays to replace that roof. But if the building code now requires fire-resistant roofing materials, upgraded ventilation systems, or different structural supports, your standard policy won't cover those upgrades. That's where building code coverage steps in.
Building codes change constantly. They evolve to make homes safer, more energy-efficient, and more resilient to local hazards like hurricanes, earthquakes, or wildfires. If your home was built 20 or 30 years ago, there's a good chance the electrical, plumbing, roofing, and structural requirements have all been updated since then. When you file a claim and start repairs, your local building department won't let you rebuild the old way—you'll need to meet today's standards.
The Three Types of Building Code Coverage
Ordinance or law coverage typically includes three separate components, and understanding each one helps you see the full picture of protection:
Coverage A covers the damaged portion of your home. This pays for the increased cost of repairing or rebuilding the part of your house that was actually damaged by the covered loss—but bringing it up to current code. For example, if a fire damages your kitchen and the electrical system needs to be upgraded to meet today's requirements, this coverage handles that extra cost.
Coverage B handles demolition of undamaged parts. Sometimes building codes require you to tear down portions of your home that weren't even damaged in the loss. Maybe the code says if more than 50% of your home is damaged, you have to rebuild the whole thing. Or perhaps your foundation no longer meets standards and needs to be replaced even though it wasn't touched by the fire. This coverage pays for demolishing and removing those undamaged parts.
Coverage C pays for increased construction costs. This is the big one. It covers the additional expenses of rebuilding your entire home to comply with new building codes—things like fire sprinkler systems, ADA-compliant features, hurricane-resistant windows, or seismic reinforcements. These requirements can add enormous costs to your rebuild, and this coverage protects you from shouldering that burden alone.
How Much Does Building Code Coverage Cost?
Here's the good news: building code coverage is surprisingly affordable. Industry averages show it costs about $66 per year for $40,000 worth of coverage. That's less than $6 a month for protection that could save you hundreds of thousands of dollars.
Most standard homeowners policies include some building code coverage automatically—typically 10% of your dwelling coverage. If your home is insured for $350,000, you'd have $35,000 available for code upgrades. For a newer home in an area with stable building codes, that might be enough. But if you own an older home, live in a region with strict or frequently updated codes (like Florida or California), or have a higher-value property, 10% probably won't cut it.
You can usually increase this coverage to 25%, 50%, or even higher. Some insurers offer unlimited building code coverage for high-value homes. The key is matching your coverage level to your actual risk. A rough rule of thumb: code upgrade costs can start at around $5 per square foot times the age of your home. For a 25-year-old, 1,800-square-foot home, that's potentially $225,000 in additional expenses—far more than the standard 10% coverage would provide.
Real-World Examples of Building Code Requirements
Let's look at some concrete examples of how building codes can drive up your repair costs. Say you need to replace your garage door after storm damage. A standard door might cost $1,750, but if your local code now requires wind-resistant doors rated for hurricane conditions, you're looking at $2,800. That $1,050 difference? Without building code coverage, you're paying it yourself.
Or consider electrical systems. Older homes often have outdated wiring that doesn't meet current safety standards. If a fire damages your kitchen, the building inspector might require you to upgrade the electrical panel and rewire parts of the house—even areas that weren't touched by the fire. These upgrades can easily run $15,000 to $30,000.
Building codes frequently address fire safety, weather resistance, plumbing, accessibility, and energy efficiency. You might need to install fire sprinkler systems, update HVAC systems to meet new efficiency standards, add earthquake reinforcements, or install ADA-compliant features like wheelchair ramps or wider doorways. Each of these requirements adds legitimate safety improvements to your home—but they also add substantial costs to your rebuild.
Who Really Needs This Coverage?
While anyone can benefit from building code coverage, certain homeowners should absolutely prioritize it. If you own an older home—anything built more than 20 years ago—codes have likely changed significantly since construction. The older your home, the bigger the gap between what you have and what current codes require.
Location matters too. States like Florida have particularly strict building codes, especially for wind and hurricane resistance. In Florida, building code coverage is often capped at 30% of your dwelling coverage by law, and many insurance experts recommend maximizing that limit. If you live in an area prone to natural disasters—hurricanes, earthquakes, wildfires—your local codes are probably more stringent and change more frequently.
High-value homes also warrant higher coverage limits. If your home is worth $500,000 or more, you might even be able to get unlimited building code coverage. The larger and more complex your home, the more expensive code-related upgrades will be if you ever need to rebuild.
How to Get the Right Coverage
Start by reviewing your current policy. Look for the ordinance or law coverage section—it might be listed as a percentage of Coverage A (your dwelling coverage). If you only have 10% and your home is older or in a high-regulation area, talk to your insurance agent about increasing it to 25% or 50%.
Ask your agent specific questions: What building codes have changed in your area in the last 10-20 years? What would it cost to bring your home up to current standards if you had a major loss? Based on your home's age and local regulations, what coverage limit makes sense? A good agent can help you estimate your actual exposure and recommend appropriate coverage levels.
Remember, you can't add this coverage after a loss occurs. You need it in place before disaster strikes. Given how affordable it is and how catastrophically expensive code upgrades can be without it, building code coverage is one of those small investments that delivers enormous peace of mind. When you're already dealing with the stress of a fire, storm, or other disaster, the last thing you need is a six-figure surprise bill for code compliance. Protect yourself now, and you'll be grateful later.
