Shopping Tips and Information

Homeowners insurance is a financial protection policy that pays a lump sum if your house is damaged or destroyed by fire, weather, theft or other disasters.

Homeowners insurance is an important purchase for many people, and there are two major reasons to buy it:

• To protect your assets 
  Homeowners insurance covers the structure of your home and your personal property, as well as your personal legal responsibility (or liability) for injuries to others or their property while they're on your property.
  

• To satisfy your mortgage lender 
  Most mortgage lenders require you to have insurance as long as you have a mortgage and to list them as the mortgagee on the policy. If you let your insurance lapse, your mortgage lender will likely have your home insured. Compared to a policy you would buy on your own, the premium might be much higher and the coverage will be limited to damage to the structure of your home. The lender can require you to pay this higher premium until you get your own homeowners insurance again.
  
  

• Compare Deductibles
  The deductible is the amount you have to pay out of pocket on each claim and applies only to coverage on your house and personal property. Make sure when choosing a policy that you are comfortable paying the deductible if you make a claim. Remember, a policy with a $100 deductible will cost more than one with a $250 deductible. Higher deductibles may be available at a reduced price. 

• Replacement Cost or Actual Cash Value?
  You have the option to choose to insure your home and belongings for either replacement cost or actual cash value. Replacement cost is the amount it would take to replace or rebuild your home or repair damages with materials of similar kind and quality, without deducting for depreciation. It is important to insure your home for at least 80 percent of its replacement value. Actual cash value is the amount it would take to repair or replace damage to your home after depreciation. 

You are not required to purchase insurance from the company your lender recommends. There are a number of unbiased sources available to find out what different insurers charge for identical products and services, including your state insurance department, consumer publications and your public library.  It's illegal for unlicensed insurers or agents to sell insurance. If you do business with an unlicensed agent or company, it might not pay your claims or refund your premiums if you cancel your policy.  

When you get quotes, it's crucial that you ask for the same coverages and limits and give the same information to each agent or company. To give you an accurate quote, the insurance agent or company will usually ask for a description of your house (such as where it's located, its square footage, when it was built and the type of construction). He or she also might ask about items that increase your insurance needs, such as owning pets and expensive possessions. Be sure to get rate quotes and key information in writing.

While you're getting quotes, you should also ask the agent some of these questions: 

• Are the agent and the insurance company licensed by my state insurance department? For how long? (The Illinois Department of Insurance can confirm the answers to these questions.)
• How can I find out the claims history of the home before I buy it? The claims history of the home might affect your premium.
• If I submit a claim, how will it affect my premium when I renew the policy?
• How will my credit history affect my premium?
• What does the policy cover? What doesn't it cover? What are the limits to the coverages?
• How much coverage do I need for my personal property?
• How much liability coverage should I buy?
• Should I buy flood insurance or earthquake coverage? Your homeowners insurance policy doesn't cover either.
• What types of water damage are not covered? Is mold damage covered?  

Make sure you ask the insurance agent if you qualify for any discounts. Some insurers offer a discount if you also buy your auto insurance from them (bundling coverage) or if you disaster-proof your home (for example, add storm shutters), get a new roof or add home security devices (for example, alarm systems).

Whether you own or rent, there are different packages of home insurance offered to protect your home and belongings. Each package protects against a specified number of events that cause damage to property. Three examples are fire, windstorm and theft. 

The following are examples of the types of coverage that are usually listed in your insurance policy. 

• Damage to House
  Covers damage to the house. The face amount of the policy (for example $100,000) is the most you will receive if your house is totally destroyed.

• Other Structures
  Covers damage to other structures or buildings, such as a detached garage, work shed, or fencing.

• Personal Property
  Covers damage to, or loss of personal property. Personal property includes household contents and other personal belongings used, owned or worn by you and your family.

• Additional Living Expense
  Covers additional living expenses when incurred. This means that the policy covers the necessary living expenses up to the stated limit, incurred by the insured to continue, as nearly as possible, the normal standard of living when the house cannot be occupied due to a covered loss.

• Comprehensive Personal Liability
  Covers personal liability. This coverage protects you against claims arising from accidents to others on property that you own or rent. With a few exceptions, such as auto or boating accidents, it is an all purpose liability policy that follows you wherever you go.

• Medical Expense
  Covers medical expenses. Coverage is limited to an amount per person and per accident for injuries occurring on your premises to persons other than an insured, or elsewhere, if caused by you, a member of your family, or your pets. An important feature of this coverage is that payment is made regardless of legal liability.

You should be aware that a home insurance policy is a legal contract. It is written so that your rights and responsibilities as well as those of the insurance company are clearly stated. When you purchase home insurance, you will receive a policy. You should read that policy and make certain you understand its contents. Keep your policy in a safe place and know the name of your insurer.

Check with your insurance agent at least once a year to make sure your policy provides adequate coverage. The addition of a room, new insulation or remodeling add value to your home and therefore may increase replacement cost. 

A home inventory can be invaluable when deciding how much insurance coverage fits your life situation and makes sure you are adequately protected should you need to file a claim.

• Group your possessions into logical categories, i.e., by hobby, by room in your home, etc.
• Your list should include celebration purchases like jewelry and art, as well as everyday leisure items such as televisions and guitars.
• Don't forget items you use rarely such as holiday decorations, sports equipment, tools, etc.
• Pull together copies of original sales receipts and/or appraisal documents. Also note model and serial numbers.
• Carefully photograph or videotape each item and document a brief description, including age, purchase price and estimated current value.
• Store your home inventory and related documents in a safe, easily accessible place online, on your computer or in a fire-proof box or safe deposit box. Consider sharing a copy with friends, relatives and your insurance provider.
  
  

Water damage from a home's plumbing or a leak in your roof is typically covered. However flood damage or destruction from ground-water or rain runoff and snow-melt is not. Flooding is a risk homeowners face everywhere in the U.S.

The standard homeowners insurance policy does not cover flood damage. Learn more about purchasing flood insurance.

If you cannot find homeowners insurance, talk to your insurance agent talk to your insurance agent about the Illinois Fair Plan.  To qualify for coverage with the FAIR Plan, you must have three unsuccessful attempts to buy property coverage from insurance companies and your property must meet basic fire, loss prevention, and safety standards.