Your home is likely your biggest investment, which means you need to get adequate protection. The best way to do that is to purchase homeowners insurance. Homeowners insurance will help cover you when unexpected tragedies strike your home. Living in a place like Chicago, which can see hectic weather and numerous crime, homeowners insurance can be very valuable coverage. Your home is a precious place and should be protected as such. Looking into homeowners insurance in Chicago can help find you the best coverage and policy for your living situation.
What is Homeowners Insurance?
Homeowners insurance covers you and your finances in the event of a disaster that damages your home and its belongings. Most home insurance policies cover the structure, your belongings, personal liability, and additional living expenses should you be displaced. Having this type of insurance will help prevent financial ruin should you be the victim of a natural disaster or other chaotic events like theft.
Types of Homeowners Insurance
While shopping for homeowners insurance in Chicago, you will come across several different types of insurance policies. Each insurance policy provides different levels of coverage and is meant to protect various types of homes.
- HO-1 – This is the simplest and most basic home insurance policy on the market. It provides coverage for a handful of perils, including storms, lightning, explosions, and theft.
- HO-2 – Referred to as broad form homeowners insurance, this type of policy offers basic forms of coverage and includes protection against falling objects, ice damage, internal freezing, and accidental damage to household systems. HO-2 policies typically cover personal property and your dwelling.
- HO-3 – This is the most common type of homeowners policy due to its “open peril” standard, which means it covers all dangers except those outlined in the exclusion portion of policy documents.
- HO-4 – Commonly known as renters insurance, an HO-4 policy is for people who rent their homes and covers the same damages listed in an HO-2 policy. However, it will not cover the physical structure of the home.
- HO-5 – This is the broadest home insurance policy and provides the highest level of coverage. For this reason, it is also the most expensive insurance for your home. HO-5 policies protect against a wider range of dangers and have extra insurance for high-value items like art. It is also a replacement cost value policy, meaning if your items are destroyed, you will receive enough payment to replace the item fully.
- HO-6 – Formally known as condo form insurance, an HO-6 policy is for condo owners. It protects your condo against the same damages outlined in an HO-3 policy; however, the structure of your condo is excluded.
- HO-7 – This insurance policy is for mobile homes and provides coverage similar to HO-3 policies. Under this policy, you will only have protection when the home is stationary.
- HO-8 – This is a home insurance policy intended to cover older homes that are either registered landmarks or otherwise deemed historic. It provides coverage similar to the HO-1 policy.
Do You Need Homeowners Insurance?
In short, yes. Every homeowner needs to have insurance to protect not only the structure of their home but also their personal belongings. While there is no specific law regarding carrying homeowners’ insurance, there are various reasons you can benefit from one. Homeowners’ insurance provides people with valuable coverage as it protects them against a wide variety of perils. One fire or burst pipe is enough to put you in financial ruin if you do not have the proper insurance policy in place. Your home is a very precious asset that deserves to be protected as such, and purchasing a homeowners insurance policy can go far.
What Does Home Insurance Cover?
Your home insurance offers a variety of valuable protection. What your specific policy covers may differ slightly from what a standard insurance policy would, but it’s still helpful to get an idea of the protection offered. A standard homeowners insurance policy provides coverage for your:
- Your home’s structure – Your insurance policy will pay for damage to your home caused by fire, hurricanes, hail, lightning, and other disasters. This may include garages and tool sheds.
- Personal belongings – This includes furniture, clothes, and decorations.
- Liability insurance – If you were to damage someone else’s home, your home insurance would help cover the costs. It also includes no-fault medical insurance, meaning if someone is injured in your home, insurance can cover expenses.
- Additional living expenses (ALE) – ALE insurance is a portion of your homeowners’ policy that will reimburse you if you are displaced after a disaster. It covers hotel stays, food, and more.
What Isn’t Covered by Homeowners Insurance?
While a standard home insurance policy is pretty expansive, it does have its limits, much like other types of insurance. Outlined below are what may not be covered by your homeowners’ insurance policy.
- Certain disasters – Floods, earthquakes, and natural wear and tear will not be covered by your homeowners’ insurance. For this kind of coverage, you will need to look into separate insurance policies.
- Expensive items – Items like jewelry and art may not be fully protected by your insurance. Coverage for personal belongings stops at a certain amount. You should look into extending your insurance coverage if you have high-value items within your home.
- Damage caused by someone else – If a neighbor damages your rug or floors, for example, it is not likely that insurance will cover it. You would have to rely on your neighbor’s insurance to cover any damage.
Cost of Homeowners Insurance in Chicago
In Chicago, the average cost of homeowners insurance is around $1,600 per year. This is higher than the state average, which is $1,400 annually for insurance coverage. But what your rates are as a homeowner in Chicago can greatly vary. Insurance rates are personalized, meaning that factors like home security systems and the age of your property will be taken into consideration. Being in Chicago, however, you can expect to see higher rates than someone living out in the suburbs. This is because Chicago is a densely populated city, and more residents mean more chances for crimes like theft and vandalism. Being near Lake Michigan also can be a concern for insurance providers when it comes to things like snow and ice. To figure out what your homeowners’ insurance rates will be, we recommend shopping around and getting quotes from a wide variety of insurance companies around the Chicagoland area. Quotes are free and easy to get, with many insurance providers offering them online or over the phone.
How Much Home Insurance Coverage do You Need in Chicago?
As a general rule of thumb, when it comes to home insurance in Chicago, you should have enough to rebuild your home and enough to cover your personal property like clothing and furniture. When it comes to the liability insurance portion of your policy, we recommend setting your coverage limits based on your personal assets, like income and savings account. If you are struggling to determine how much insurance you need, many insurance companies offer an insurance calculator on their website for free. Using their insurance calculator, you can get an estimate for how much home insurance will be right for you and your assets. It’s important to have the right amount of insurance. Carrying too little insurance will leave you in a very unfortunate financial situation should a peril be damaging enough.
Recommended Homeowners Insurance Coverage For Chicago
While home insurance is not legally required in Chicago, your lender may ask you to buy insurance before approving your mortgage loan. However, even if this is not the case for you, homeowners insurance is incredibly important to have, especially in Chicago. The city can be unpredictable, and you want to make sure you’re protected. If you are having trouble figuring out what kind of insurance you need, we have some recommendations outlined below.
Flood Insurance
Being close to a lake, chances of flooding are not extreme but still great for the residents of Chicago. Adding flood insurance to your homeowners’ insurance policy can help greatly to protect your belongings and home. This insurance may not be included in your standard policy as water not originating from inside the home can be excluded. You want enough flood insurance to be able to rebuild your home and cover all your personal items.
Personal Property Coverage
While homeowners insurance covers much of your personal property, it does have its limits. Expensive items like collections, art, electronics, and jewelry may not be fully protected by your standard homeowners’ insurance policy. You should consider increasing your limits or utilizing scheduled personal property coverage. This will help raise insurance limits for certain valuables.
Identity Theft Coverage
You may not realize it, but your homeowners’ insurance policy may offer you identity theft and fraud insurance. Identity theft and fraud insurance can pay for identity restoration services, such as credit monitoring. There is a fixed coverage limit associated with this type of insurance so make sure you set them based on your assets.
Chicago Home Insurance Discounts
Being in Chicago, homeowners insurance can get a little pricey. Thankfully, insurance companies offer some discounts to ease insurance rates. Discounts for homeowners insurance available in Chicago include:
- Claims-free discount – Homeowners without insurance claims on their record may qualify for a claims-free discount when they switch insurance providers.
- Security system discount – Fitting your home with safety features like cameras and alarms can help qualify you for an insurance discount. Homes with upgraded security are less likely to be targeted by thieves leading to fewer insurance claims.
- Bundling discount – If you already have car insurance with one company, see if they offer homeowners insurance as well. Bundling insurance policies under a single provider can give you a break on your rates.
- Paid-in-full discount – Some insurance companies will give you a discount on insurance rates when you pay your premiums in full after signing if you are financially able to.