Do you have enough saved to rebuild, repair, or replace your home and belongings if a sudden and unexpected loss happens? If not, you need home insurance.

Did you borrow money to buy your home? Most lenders require proof of insurance.

Are you concerned that a visitor could be hurt on your property, or that your negligence (failure to use reasonable care) could lead to another person’s injuries or property damage? Home insurance pays medical expenses (up to the policy limit) when a nonresident is accidentally injured on your property or injured by you, a member of your family or your pet. It also protects your legal responsibility (up to the policy limit), and if necessary pays for a legal defense.

Declarations – The “dec” page personalizes the policy. It identifies your name, address, property location, year and type of construction, lien holder (if applicable), coverage dollar limits, deductible, policy identification number, coverage beginning and ending dates, and endorsements that change the policy form.

Policy Form – This describes what the insurance company will do in return for the premium. Definitions explain insurance terms used throughout the contract. Review this section to learn what “covered property” is, and who is considered an “insured.” Coverages and their functions are detailed in the coverage section. Find out how you’re protected for property losses and personal liability protection. Exclusions outline situations when the policy will not cover you or the insured property. Read this section carefully. Conditions are important because they identify the policyholder’s responsibilities when a loss occurs. For example, policyholders must cooperate in claim investigations. This section also addresses cancellation requirements. Supplementary payments identify expenses the insurer will pay in addition to the policy’s liability limits.

Endorsements – These are automatic or “buy back” coverages that modify or change the terms of the policy form.

Section 1 (Property Coverage)

Section 2 (Liability Coverage)

Homeowner 2 (Broad Form). Covers dwelling, other structures, and personal property for losses caused by:

• Fire
• Lightning
• Windstorm
• Hail
• Explosion
• Riot and civil commotion
• Aircraft
• Non-owned vehicle
• Smoke
• Glass breakage
• Vandalism
• Burglary
• Robbery and theft
• Volcanic eruption
• Damage from falling objects
• Weight of ice, snow and sleet
• Sudden and accidental tearing apart, cracking, burning or bulging of a steam or hot water heating system (or appliance for heating water)
• Accidental discharge, leaking or overflow of water or steam from within a plumbing, heating or air conditioning systems or domestic appliances
• Sudden and accidental injury from artificially generated currents to electrical appliances, devices, fixtures and wiring (TV and radio transistors, tubes and similar components not included)

Also provides for additional living expenses when a covered peril forces you to temporarily relocate.

Homeowner 3 (Special Form). Broadens coverage to “open-perils” for dwelling and other structures. An “open perils” policy covers all causes of loss except those specifically excluded. Personal property is covered for HO-2 perils. Additional living expense coverage is included.

Homeowner 3 + HO 15 Endorsement (All Risk). Covers dwelling, other structures, and personal property for losses caused by any peril except those specifically identified in the policy. Additional living expense coverage is included.

Homeowner 4 (Renters Form). Covers personal property for HO-2 perils. Additional living expense coverage is included.

Homeowner 6 (Condo Form). Covers personal property for HO-2 perils. Building additions and alterations inside the owner’s individual unit are also insured. Additional living expense coverage is included.

Homeowner 8 (Modified Form for Older Homes). Designed for an older home whose replacement cost is much higher than its market value. Covers dwelling, certain other structures, and personal property for losses caused by fire or lightning, windstorm or hail, explosion, riot or civil commotion, vandalism or malicious mischief, falling aircraft, vehicle damage, smoke, theft (from within premises only) and glass breakage.

Personal information. Name, address, past loss record, information regarding a home-based business, nature and breed of household pets, and social security number (many companies use a credit-based insurance score to determine program eligibility and/or pricing).

Information on the house. Year and type of construction, years of updates on heating, wiring, plumbing and roof, proximity to fire hydrant, square footage, special features (fireplace, deck, multiple bathrooms, finished basement, attached garage, etc.), and single or multiple family residence.

Insurance coverages. Dwelling, contents, and liability coverage limits, as well as additional endorsements like contents replacement cost, back up of sewer-drain, refrigerated products, etc.

Deductible. How much you are willing to pay out-of-pocket before the insurance company begins paying.

Coverage. All insurance policies are not alike. The least expensive policy may also provide the least amount of coverage. Find out what is and is not covered before making a decision.

Financial stability. A company’s financial strength is an indicator of its ability to pay future claims. Several independent organizations (A.M. Best, Standard & Poor’s, Moody’s, and Weiss Ratings Inc.) evaluate and report on insurer financial strength. Be sure the company you’re considering is financially sound.

Licensing Status. Confirm the insurer is licensed to operate in Illinois. Companies not approved by the Illinois Division of Insurance don’t have to obey Illinois insurance laws or participate in the Insurance Guaranty Fund, which protects Illinois consumers if a company goes bankrupt.

Service. Check the company’s customer satisfaction record. Also, the Illinois Division of Insurance tracks consumer complaints against insurance companies and releases an annual report.

Comfort. Buy insurance from an agent or company representative that you feel comfortable with. At some point you may need to seek advice regarding your insurance coverage or claim settlement.

Find out how much it costs to completely rebuild your home at today’s construction prices. This figure is known as its replacement cost. Your property insurance agent or company representative can help you determine this figure. Factors that affect replacement cost include:

• Square feet.
• One or two story.
• Exterior construction (frame, masonry, veneer)
• Attached garage.
• Roofing materials.
• Additional bathrooms.
• Special features (fireplace, hardwood flooring, granite countertops, etc.).
• Room additions.
• Style of home (ranch, colonial, custom-designed).
• Foundation (full basement, partial basement, crawl space).
• Local construction costs.

Replacement cost is NOT affected by:

• Mortgage value.
• Market value.
• Land value.

Then, find out what your homeowner insurance policy says. Most homeowner insurance contracts are replacement cost policies, which means losses are settled without a deduction for age or wear and tear. Most contracts require policyholders to insure the dwelling for a certain percentage of its replacement cost. This figure, often 80%, is known as the co-insurance requirement. It’s best to insure your home for 100% of its replacement cost. You may not have enough money to repair damages or rebuild if you underinsure your home.

The amount of insurance you have on the dwelling determines how much insurance you have for:

• Other structures (most policies provide 10% of dwelling limit).
• Personal property (most policies provide 50% - 75% of the dwelling limit).
• Additional living expenses (most policies provide 40% of the dwelling limit).

Unless stated otherwise, personal belongings are insured on an actual cash value basis. This means loss settlements are reduced for age, wear and tear (depreciation).

• Most people have more money invested in personal property than they realize.
• Conduct a room-by-room inventory to establish how much insurance you need. The list should include brand names, make and model information, serial numbers and receipts whenever possible. Photographs, videos, and appraisals are also useful.
• Compare your personal property coverage needs with the insurance policy’s limitations. Many contracts have restrictions on the amount of coverage available for items like jewelry, guns, furs, golf equipment, etc.
• Ask about buy-back endorsements to address gaps in coverage.

Choose a liability limit that is sufficient to protect your financial assets. You may need more coverage than hat the automatic $100,000 limit.

Earthquake – Pays for damage caused by earthquake.

Flood – Pays for damage caused by flood. Flood insurance is available from a variety of insurance companies, as well as the National Flood Insurance Program. You must live in a community that participates in this federal program. Lenders require flood insurance if you live in certain flood hazard areas.

Home Business – Provides limited coverage for business machines, tools, and liability.

Identity Theft – Provides reimbursement for costs associated with restoring identity and correcting credit history.

Increased Liability Limits – Raises personal liability limit from $100,000 to $300,000 or $500,000.

Increased Medical Payments Limits – Raises medical payments from $1,000 to $2,000 or $5,000.

Increased Other Structures Limits – Raises limit for other structures on insured premises.

Increased Personal Property Limits – Raises limit for certain categories of personal property. For example, $1,000 limit on jewelry can be increased to $5,000.

Inflation Guard – Automatically raises coverage limits each year based on price increases for building materials and labor (inflation).

Mine Subsidence – Pays when an underground mine shift causes damage to your property. Insurers must offer mine subsidence insurance in counties where mines are under 1% or more of the land. Underground mines are common in central and southern Illinois, but other areas of the state are affected too. You must sign a rejection form to remove this coverage if you live in a county requiring mine subsidence insurance.

Personal Property Replacement Cost – Changes personal property loss settlement to replacement cost basis (no depreciation for age, wear, and tear).

Scheduled Personal Property (Floater) – Provides broader coverage and higher limits on specifically described valuables like jewelry, guns, golf equipment, fine arts, silverware, special collections. Appraisals may be required.

Sewer Backup – Covers damage resulting from backup of sewer system.

Umbrella or Excess Liability – Provides liability coverage over and above your auto and homeowner policy for personal liability and lawsuits.

Watercraft – Extends liability (not physical damage) coverage to your small sailboat or outboard motor boat.

Company Operations. Insurers must pay employees, office expenses, taxes, etc.

Policyholder Claims. There must be sufficient funds to pay for policyholders’ losses.

Financial Return. A publicly held stock insurer must satisfy its shareholders. A mutual company is owned by policyholders and must address their concerns.

Insurance pricing is linked to loss potential. The lowest premiums go to those least likely to have claims. Insurers are always looking for better ways to evaluate risks and accurately predict losses.

Age of Dwelling. Newer dwellings tend to have fewer losses, and cost less to insure.

Building Construction. Frame homes burn more easily and cost more to insure than masonry construction.

Condition of Dwelling. Well-kept, updated dwellings are less likely to have losses, and cost less to insure.

Coverage Limit. Higher values homes cost more to insure.

Credit. There is a statistical relationship between credit and claims. Those with good credit generally have fewer claims and pay lower insurance premiums.

Deductible. Taking a high deductible will lower your premium. However, you’ll pay more out of your pocket when a loss occurs.

Location. Fires are more likely to be contained when the home is close to a to a fire hydrant and located in a quality fire protection district. Each community fire protection district is periodically evaluated and rated according to training, fire-fighting equipment, response time, and water supply. Insurance costs less in districts with good fire protection.

Loss Experience. Insurers consider past claims to be predictors of future losses. You’ll pay less for insurance if you have a good claim record.

Policy Form. Contracts covering a broader range of losses cost more.

Frequency and severity of claims. This refers to total number of claims the insurer handles, and how serious they are. Frequent and severe claim activity may cause an insurer to increase premiums.

Building materials/labor, medical/hospital, lawsuit/court judgment costs. Insurance companies pay more in claims as these expenses increase.

Insurance fraud. False claims and inflated/padded damage estimates increase claim costs.

Competition/Marketing Strategy. Rates are based in part on each company’s growth strategy and desire to be competitive with other insurers.

Private Insurers: Standard companies use a variety of strategies to compete for homeowners’ premium dollars. Each carrier has its own eligibility and pricing criteria. If you cannot obtain insurance from a standard insurance company, try the Illinois FAIR Plan.

Illinois FAIR Plan: The FAIR Plan is an association that operates like an insurance company. It offers most of the home, personal property, and personal liability coverages that private insurance companies provide.

There are two basic requirements:

Auto-Home – for having both auto and home insured with same company.

Protective Devices – fire extinguishers, smoke alarms, deadbolt locks on all outside doors, sprinkler system, or security alarm system hooked up to the police station.

Mature Homeowner – for those over 55 and retired.

Non-smoker

New Home - for brand new homes, or those less than nine years old.