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Ordinance Or Law Coverage Exam 2026–
2027 | Comprehensive Question Practice
Test with Answers & Rationales| Free Pdf
Access
Q1. What is the primary purpose of Ordinance or Law
Coverage in a commercial property insurance policy?
✅ B. To pay for additional costs due to compliance with
building codes, zoning, or demolition laws after a covered
loss
Rationale: Ordinance or Law Coverage addresses the gap
between the actual cash value (ACV) or replacement cost of
damaged property and the cost to rebuild according to current
codes. Standard property insurance pays to repair or replace
the building as it was before the loss — but if new codes require
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upgrades, that extra cost is not covered without Ordinance or
Law Coverage .
Q2. A building constructed in 1985 is damaged by fire. The
local building code now requires sprinklers, wider hallways,
and accessible entrances. Which coverage pays for these
upgrades?
✅ C. Coverage C – Increased Cost of Construction
Rationale: Ordinance or Law Coverage is typically divided into
three parts: Coverage A (Loss to Undamaged Portion), Coverage
B (Demolition), and Coverage C (Increased Cost of Construction).
Coverage C pays for upgrades required by current codes when
repairing or rebuilding the damaged portion of the building .
Q3. Under ISO form CP 10 30 (Ordinance or Law Coverage),
what triggers Coverage A – Loss to the Undamaged Portion of
the Building?
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✅ C. A building ordinance requires demolition of undamaged
parts after a covered loss to the damaged part
Rationale: Coverage A applies when a law or ordinance requires
the demolition of undamaged portions of the building because
the damaged portion exceeds a specified percentage (e.g.,
50% of value). The coverage pays for the value of the
undamaged portion that must be demolished .
Q4. A city has a "50% rule" requiring full building demolition
if damage exceeds 50% of the building's value. The insured's
building has a fire causing 40% damage. The local building
official orders demolition because the remaining structure is
unstable. Which Ordinance or Law coverage applies?
✅ B. Coverage B – Demolition Cost
Rationale: Coverage B pays for demolition costs when a law or
ordinance requires demolition of the building. Even if the
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damage percentage is below the triggering threshold, if a
building official orders demolition for safety reasons and that
order is based on code enforcement, Coverage B may respond .
Q5. Under ISO CP 10 30, what is the typical limit for Coverage
C – Increased Cost of Construction?
✅ C. 10%, 25%, or 50% of the building limit, as selected by
the insured
Rationale: Coverage C limits are expressed as a percentage of
the building limit (e.g., 10%, 25%, 50%). The insured selects the
percentage based on risk exposure. Higher percentages provide
more protection but increase premium .
Q6. Which of the following is NOT covered under Ordinance
or Law Coverage?
✅ D. Cost to upgrade due to voluntary renovations not
required by code
Ordinance Or Law Coverage Exam 2026–
2027 | Comprehensive Question Practice
Test with Answers & Rationales| Free Pdf
Access
Q1. What is the primary purpose of Ordinance or Law
Coverage in a commercial property insurance policy?
✅ B. To pay for additional costs due to compliance with
building codes, zoning, or demolition laws after a covered
loss
Rationale: Ordinance or Law Coverage addresses the gap
between the actual cash value (ACV) or replacement cost of
damaged property and the cost to rebuild according to current
codes. Standard property insurance pays to repair or replace
the building as it was before the loss — but if new codes require
,Page 2 of 117
upgrades, that extra cost is not covered without Ordinance or
Law Coverage .
Q2. A building constructed in 1985 is damaged by fire. The
local building code now requires sprinklers, wider hallways,
and accessible entrances. Which coverage pays for these
upgrades?
✅ C. Coverage C – Increased Cost of Construction
Rationale: Ordinance or Law Coverage is typically divided into
three parts: Coverage A (Loss to Undamaged Portion), Coverage
B (Demolition), and Coverage C (Increased Cost of Construction).
Coverage C pays for upgrades required by current codes when
repairing or rebuilding the damaged portion of the building .
Q3. Under ISO form CP 10 30 (Ordinance or Law Coverage),
what triggers Coverage A – Loss to the Undamaged Portion of
the Building?
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✅ C. A building ordinance requires demolition of undamaged
parts after a covered loss to the damaged part
Rationale: Coverage A applies when a law or ordinance requires
the demolition of undamaged portions of the building because
the damaged portion exceeds a specified percentage (e.g.,
50% of value). The coverage pays for the value of the
undamaged portion that must be demolished .
Q4. A city has a "50% rule" requiring full building demolition
if damage exceeds 50% of the building's value. The insured's
building has a fire causing 40% damage. The local building
official orders demolition because the remaining structure is
unstable. Which Ordinance or Law coverage applies?
✅ B. Coverage B – Demolition Cost
Rationale: Coverage B pays for demolition costs when a law or
ordinance requires demolition of the building. Even if the
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damage percentage is below the triggering threshold, if a
building official orders demolition for safety reasons and that
order is based on code enforcement, Coverage B may respond .
Q5. Under ISO CP 10 30, what is the typical limit for Coverage
C – Increased Cost of Construction?
✅ C. 10%, 25%, or 50% of the building limit, as selected by
the insured
Rationale: Coverage C limits are expressed as a percentage of
the building limit (e.g., 10%, 25%, 50%). The insured selects the
percentage based on risk exposure. Higher percentages provide
more protection but increase premium .
Q6. Which of the following is NOT covered under Ordinance
or Law Coverage?
✅ D. Cost to upgrade due to voluntary renovations not
required by code
