The Deductible Surprise That Could Cost NJ Homeowners Thousands
If you own an older home in New Jersey, you probably already know that repairs can get expensive fast. But what most homeowners don’t realize is that their standard insurance policy won’t always pay to bring their home up to current building codes after damage.
That’s where Ordinance or Law coverage comes in — a little-known protection that can make the difference between a fully restored home and a financial nightmare.
What Is Ordinance or Law Coverage?
This coverage pays for the additional costs required to meet current building codes when repairing or rebuilding your home after a covered loss.
Building codes are constantly updated to improve safety — stronger electrical systems, fire-resistant materials, plumbing upgrades, energy efficiency requirements, and more. If your house was built decades ago, those updates weren’t part of the original construction.
So, if a fire, storm, or other covered loss damages your home, the insurer will pay to restore it as it was. But the extra cost to meet modern code? That’s on you — unless you have Ordinance or Law coverage.
Why Older NJ Homes Are Most at Risk
- Frequent code changes. New Jersey adopts regular updates to the International Building Code (IBC). Even minor changes can trigger mandatory upgrades during repair work.
- High renovation costs. Local labor and material costs in NJ are among the highest in the region, magnifying the cost gap between “repairing” and “bringing up to code.”
- Partial losses still count. You don’t need a total loss for this coverage to apply. Even repairing part of your home can require upgrades throughout.
What Ordinance or Law Coverage Typically Includes
1. Demolition Costs: Paying to tear down undamaged parts of the home if required by local ordinance.
2. Increased Cost of Construction: Covering upgrades to meet new codes — like fire sprinklers or GFCI outlets.
3. Loss to the Undamaged Portion: If the building department says the whole structure must come down, this covers the part of the home that wasn’t originally affected by the damage.
Real-World Example
A 1950s colonial in Middlesex County suffered a small kitchen fire. The damage itself totaled around $30,000. But the town required the homeowner to rewire the entire first floor to meet current code — an additional $12,000 not covered under the standard policy.
Because the homeowner had Ordinance or Law coverage, that extra $12,000 was fully paid. Without it, it would have come straight out of pocket.
How Much Coverage Do You Need?
- Most carriers offer 10%, 25%, or 50% of the dwelling coverage amount as an add-on.
- For older or historic homes, 25%–50% is strongly recommended.
- This coverage typically costs only a few extra dollars a month — but can save tens of thousands later.
How to Check if You Have It
✔ Review your Declarations Page — it’s usually listed as “Ordinance or Law” or “Increased Cost of Construction.”
✔ Ask your agent if your coverage limit is enough for your home’s age and size.
✔ Update your coverage whenever you renovate — newer systems may change what you need.
The Bottom Line
Older homes bring charm and character — but also risk. If you ever face a major repair, local code upgrades can turn a manageable claim into a financial burden.
Ordinance or Law coverage is one of the most overlooked protections in home insurance — but for New Jersey’s older housing stock, it’s one of the most important.
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