Information About Buying Coverage in Illinois

Homeowners insurance laws may be similar between the states, but there are always some differences between them, so homeowners need to familiarize themselves with their own state's regulations. The Illinois Department of Financial and Professional Regulation Insurance Division maintains information for consumers of all types of insurance, including the FAIR Plan. A not-for-profit association, the Illinois Fair Access to Insurance Requirements Plan is sustained by close to 500 providers throughout Illinois, and was designed to assist consumers in the state who cannot otherwise get policies due to factors outside of their control (such as environmental hazard issues).

Illinois Laws to Consider

The Prairie state permits insurers to use credit scores to determine whether to offer a consumer a policy, renew a policy, and the rates charged for the policy. This information is used both in underwriting and rating on policies. If the company you've chosen to apply with uses credit information, it is required by law to inform you of such at the time of your application.

Your mortgage lender will have specific requirements you must follow, and you will also want to look at additional options, such as personal property replacement and flood protection. However, most companies offer the equivalent of the following homeowners policy forms: HO-2, HO-3, and HO-5, defined below:

  1. *Broad Form (HO-2)* - Concerns only specifically listed hazards.
  2. *Special Form (HO-3)* - Property and liability coverage for the house, other buildings on the property, and loss of use of the same for all specifically listed risks. Personal property is also covered for those risks listed. HO-3 offers more protection than than HO-2.
  3. *Comprehensive Form (HO3/HO5)* - Home and personal property coverage for everything not specifically excluded. This is the broadest form of protection available; however, not all insurers offer it.


Mold has become an increasing concern for Illinois residents, and while mold needs water in order to grow, homeowners policies do not include every form of water damage. Types of water damage that are usually excluded include:

  1. frequent or constant seepage or leaks
  2. humidity or condensation issues
  3. landscaping or drainage issues
  4. floods

Standard policies will shelter consumers from some unexpected, accidental water damage; i.e., pipes that burst, sewer back-up, and sump pump malfunction, provided that you have such protection. However, some companies specifically exclude mold that results from such damage, so you should check your policy carefully. On the other hand, in a covered fire or lightning loss, if mold occurs as a consequence to that water damage, it would be included, subject to policy limits.

As a consumer, you should choose a plan that protects your principal investment: the place you call home. You need coverage that provides you with enough money to recover in the event of a total loss of your home. You will need to choose from three different ways that companies use to settle claims:

  1. *Actual cash value (ACV)* - A policy with ACV pays the replacement cost less depreciation, which is the decrease in property value caused by age or wear and tear. You are paid the property's actual worth at the time just prior to the loss, not the cost of that property if you were to buy it new today.
  2. *Replacement cost* - Unlike ACV, this type pays the cost of rebuilding or replacing the property with the same quality materials in today's prices.
  3. *Guaranteed replacement cost* (aka "extended replacement cost") - If replacing your home would cost more than your policy limit, this add-on will pay the overage. Providers may limit that amount to a certain percentage above the policy limit, such as 20%, and other restrictions may apply.
  4. *Personal Property* - Personal possessions are typically insured for half of the structure's limit. In other words, if your home is insured for $200,000, the personal property limit could be $100,000.