Homeowners insurance is your first line of defense against property damage and loss. In Illinois, homeowners can buy standard property coverage and liability protection or explore the many add-ons and endorsements available, such as additional coverage for flood damage and valuable items.
While Illinois does not require homeowners to have insurance, leasers and mortgage lenders usually require it on a case-by-case basis. Continue reading for our guide to homeowners insurance in Illinois, including the regulations that benefit homeowners.
Overview of Illinois Homeowners Insurance Regulations
The Illinois Department of Insurance is the regulatory body that homeowners should familiarize themselves with. According to the IDOI, “homeowners insurance” is defined as “personal multi-peril property coverages.”
This definition applies to private contracts between a lender and a homeowner as well as policies bought through Illinois’ Industry Placement Program for those whose insurance has been deemed nonrenewed following a state inspection.
Compliance with IDOI regulations protects homeowners from losing their policies and insurers from losing their right to sell plans in Illinois.
Mandatory Coverage Requirements
Illinois does not have a minimum homeowners insurance requirement mandated by state law. However, most mortgage lenders are required to have one to protect their investment. Homeowners insurance can be purchased in Illinois for dwelling coverage, personal property coverage, liability coverage, and additional living expenses (ALE) coverage.
Additional endorsements include earthquake, flood, mobile home, and tenant insurance. While none of these is required by state law for non-mortgage lenders, all Illinois homeowners should review their lender’s policy requirements and consider protecting themselves.
Policy Limits and Deductibles
While Illinois does not regulate minimum and maximum policy coverage, most mortgage contracts require a policy equal to at least 80% of the home’s replacement cost. The deductible, the amount the homeowner pays on each claim before the coverage activates, can be negotiated with the lender.
In the absence of specific state regulations, Illinois homeowners should shop between providers to find a plan that balances good coverage with an acceptable deductible, noting that plans with lower deductibles will have higher premiums. The best plan for you depends on the coverage you hope to achieve.
Consumer Protection Laws
Under Illinois state law, the IDOI issues the following regulations to protect consumers against hostile lenders and insurers:
- Insurers must provide a reason for canceling or failing to renew a homeowners insurance policy, as well as deliver written notice for the cancellation at least 45 days in advance.
- Insurers canceling due to the homeowner defaulting on payments must provide written notice ten days in advance of cancellation (30 days in a case involving payment fraud).
- Insurers must refund unearned premiums on canceled policies within 30 days unless the homeowner failed to pay their existing premiums.
- Insurers must write their policies in clear language, including clear summaries of coverage and exclusions.
- Insurers cannot deny insurance under certain conditions, including the use of an indoor space heater, the ownership of a specific breed of dog, and more.
By enforcing these regulations, the IDOI helps policyholders stay informed about their coverage details and the circumstances of their policy cancellation. So long as the homeowner keeps up with their payments, insurance companies are required to refund unused premiums.
Claims Process Regulations
In order to maintain a transparent and fair marketplace, Illinois mandates require that insurance providers acknowledge claims within 15 working days of filing. This prevents them from defaulting on claims due to administrative delays.
The IDOI also mandates that insurers communicate claim eligibility with the buyer within 21 working days. They must also come to a verdict on the homeowner’s claim within 30 days from the initial affirmation of the homeowner’s liability, except in disputed claims.
In disputed claims, the insurer must provide a written explanation of the lower offer or claim denial within 30 days following the claim investigation. Additionally, Illinois homeowners reserve the right to file a lawsuit against their insurer within 12 months from the date of the damage or loss or from the date of the claim’s closure.
Impact of Local Regulations on Coverage Options
When building codes, zoning laws, or other local regulations change, Illinois homeowners may need ordinance or law coverage, also known as “building code upgrade” coverage. Standard insurance usually pays to restore damaged property to its original state, which could conflict with new building codes.
While Illinois homeowners need separate coverage for tornados, floods, and earthquakes, additional building code coverage helps them recover from the damage without paying for reconstruction and renovation.
Recent Changes and Updates in Illinois Insurance Laws
Homeowners insurance costs in Illinois have steadily increased for a few years due to supply chain costs and inflation. The Illinois Coalition for Fair Car Insurance aims to create more regulatory oversight for insurance price hikes.
Since auto and homeowners insurance are often bundled together, this bill may impact homeowners insurance policies as well.
Illinois offers the FAIR plan, or Fair Access to Insurance Requirements, to help struggling homeowners get coverage despite these price hikes. Reinforcing the security and structural integrity of the home can also make it more attractive to insurance lenders.
Ask About Homeowners Insurance From Pro Insurance Group
Pro Insurance Group helps Illinois homeowners prepare for existing and new insurance regulations by customizing the individual’s policy options to match their situation and meet state requirements.
Illinois is an increasingly difficult insurance market, but you don’t have to figure it out on your own. Contact Pro Insurance Group today for personalized solutions to homeowners insurance.