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Key Takeaways

Business owners may have to pay to repair their building to comply with updated code, which can be an additional cost.
Ordinance or Law coverage is typically not part of a standard commercial property insurance policy, so you'll have to add it as an endorsement.
Includes coverage for undamaged portions of a building, building demolition and increased repair costs to bring a property up to code.

small business owner enjoying their job knowing they have great building ordinance or law coverage

What Does Ordinance or Law Coverage Cover?

Ordinance or law coverage is typically an endorsement or optional coverage that can be added to your commercial property insurance policy. It covers the costs to rebuild a commercial property up to local building codes, ordinances or laws if it’s damaged or destroyed by a covered loss. This coverage is important if you’re located in an older building or a city that often has changes to their building code requirements.

Typically, there’s three main types of ordinance or law coverage that cover different events, known as designated A, B and C.

Coverage A: The Undamaged Portion of a Building

Commercial property insurance can help pay for the portion of the covered property that has been destroyed. With the ordinance or law coverage endorsement added to your policy, it will cover the remaining amount needed to restore the property back to whole and in compliance with the latest building codes. For example, if a fire in your commercial building damages only 65% of your roof, your property insurance would only cover the damaged portion needed to be restored. Since you’ll need a whole new roof, not just 65% of a roof, your Ordinance or Law Coverage A would kick in to help pay for the remaining 35% or the undamaged portion.

Coverage B: Building Demolition

Coverage B is related to Coverage A in that it also deals with the undamaged portion of a commercial building, but it helps cover the costs related to the demolition of the undamaged portion. For example, if your bakery has a fire and the building code requires you to tear down the entire structure after a fire, but only 60% of the structure was damaged, your standard commercial property insurance would only reimburse you for the 60%. If you don’t have Ordinance or Law Coverage B, you’d have to pay for the remaining 40% out of pocket. With Ordinance or Law Insurance Coverage B, you’re financially protected against the costs of demolishing and removing debris from the undamaged portion of your building.

Coverage C: Increased Repair Costs

Ordinance or Law Coverage C provides coverage for any building enhancements that are required if the building code has changed since the time of the construction of your commercial building. For example, if new building code requires that your commercial space must have fire sprinklers, this coverage would help pay for the installation of the fire sprinklers. If you don’t have this endorsement, you’d have to pay for these repairs out of pocket to meet the new building code requirements.

Ordinance or Law Coverage FAQs

How Much Ordinance or Law Coverage Should I Have?

There are several factors to consider when deciding how much insurance you’ll need to protect your commercial property. You should consider the following:

Your location: If you live in an area where building codes frequently change, like in a large city, ordinance or law coverage can help you pay for any required changes you’ll need to make if the law requires it.
Your building’s age: If your business is in an older building, you may need to bring your building up to code more frequently. An older building might also be higher risk of experiencing a fire or water damage if it’s not built up to code.
Your building’s size: Larger structures often cost more to repair if something unexpected happens. Having ordinance or law coverage can help so you don’t have to pay out of pocket for the cost of rebuilding or repairing your building if the local ordinances or laws change.

What Does Ordinance or Law Coverage Cost?

On average, customers of The Hartford pay about $1,605 a year for commercial property insurance.** However, commercial property insurance costs (with the ordinance or law endorsement) may be higher or lower than that amount. Keep in mind that insurance companies use several different factors to determine insurance costs because each business has their own unique needs.

Is Building Ordinance or Law Coverage a Separate Insurance Policy?

Ordinance or law coverage is not a separate insurance policy, but it’s an endorsement or optional coverage that can be added to your commercial property insurance policy.

When Do I Need Ordinance or Law Coverage?

Your business may need to add ordinance or law coverage to your commercial property insurance policy if you own or rent an older building, or you’re located in a city that changes building codes or laws often. This optional endorsement can help you pay for the full repair costs of a property damage claim if your building is found to be not in compliance with new building codes. Without the ordinance or law coverage endorsement, you’d have to pay out of pocket to bring your company’s building up to code, which can get costly.

What Does Ordinance or Law Coverage Mean in Insurance?

Ordinance or law coverage is an endorsement that can be added on to your commercial property insurance policy. This coverage helps provide financial protection against the repair costs associated to comply with building codes, ordinances or laws during the repair or reconstruction of a damaged commercial building. It can also help pay for the building demolition and removal of debris of the undamaged portion of a building.