A Guide to Illinois Landlord Insurance

 Post by Azibo Team on November 29, 2022

Learn the unique factors that affect the price of Illinois landlord insurance, as well as strategies to lower your premiums.

From the towering skyscrapers of Chicago to the rolling hills and farms of rural Illinois, the Prairie State is home to one of the country’s largest rental markets. 

As the Midwest becomes increasingly affordable compared to other regions in the U.S., many businesses have relocated or set up offices in Illinois — and in turn, renters are flocking to Chicago and its suburbs for work. While this creates a strong rental market, maintaining an Illinois investment property also comes with challenges — including brutal winters, unpredictable weather patterns created by the Great Lakes, and more.

To protect themselves, Illinois landlords need to invest in comprehensive property insurance. Here, we explore which factors affect the price of Illinois landlord insurance, why you need to protect your rental portfolio, and strategies for lowering your premiums. 

A brief overview of the Illinois real estate market

The Illinois real estate market offers unique opportunities for landlords, as the Midwest becomes an increasingly affordable place to live, as well as the plethora of universities drawing students to Chicago, Evanston, and beyond. 

It’s unsurprising, then, that the Illinois rental market is among the fastest growing in the U.S. That being said, there are also some unique challenges that come with maintaining an investment property in this state. 

First and foremost, there’s a reason why Chicago is referred to as the “Windy City.” Illinois at large is known for its harsh winters and extreme winter storms. Due to its proximity to the Great Lakes, Illinois experiences its own unique weather systems including heavy snow, high winds, hail, and flood exposure. As a landlord, it’s important to understand the intensity of these weather conditions and how they can affect your maintenance costs and property value. 

Much like New York, Illinois also has many older properties built prior to 1950. Even Chicago’s metro system, for example, is over 125 years old. The cost of maintaining and updating the electrical system, plumbing, HVAC, and structural elements of these buildings can be high. 

Landlords in Illinois also have to be thorough about reading inspection reports and knowing the condition of their property prior to purchasing. You don’t want to discover something surprising — like walls with lead-based paint — and have your insurance claim be rejected as a result of an exclusion on your policy.

In the same vein, not all landlord insurance policies cover circumstances surrounding asbestos, lead paint, or mold. For example, an old electrical system that uses knob and tube wiring (rather than a modern fuse box or circuit breakers) may be excluded from your policy, cause a higher deductible or premium, or even prevent some insurance carriers from being willing to write a policy for the property at all. 

Another important consideration for landlords is the risk of crime in the city center. Historically, neighborhoods in the South Side of Chicago or downtown are prone to higher crime rates — and in turn, insurance can be more expensive. Some of these neighborhoods may include lower-income tenants that fall into the Section 8 subsidies category. The Section 8 Housing Choice Voucher program encourages landlords to offer rentals to very low-income families, as well as elderly or disabled individuals. While becoming a Section 8 landlord may not be a good fit for every real estate investor, it does have many advantages — and you’d be helping people in need. 

As always, it’s important for landlords to do thorough research up front, carefully considering where they’ll purchase property, what the community is like, and who their tenants will be.

How much insurance do I need for my Illinois investment property?

While some states and zip codes require minimum coverage or specific policies — as do many mortgage companies — choosing how much insurance you buy is primarily a personal decision. That said, there are some important factors to consider when setting the limits of your personal property and liability coverage in Illinois, including:

  • Your property’s unique risks. Are you on the coast of Lake Michigan or close to another body of water? Are you in a high-rise building? If so, your property may be more susceptible to damage from wind, water, and other natural perils. Be sure to have coverage in place for these types of perils, and ask your agent to recommend other policies or coverages that may help you be more comprehensively protected.
  • How much of your personal property is available for tenant use. What personal property can tenants use, and how expensive is this property? This helps determine your personal property limits on a landlord insurance policy.
  • Your personal risk tolerance. What makes the most financial sense for you? Are you willing to have a higher deductible for lower premiums?

By answering these questions, you can make a more informed decision about how much coverage makes the most sense for you and your property. That said, there are some Illinois-specific considerations that should factor into this decision-making process.

Important considerations for Illinois property insurance

While landlord insurance is not required by law in Illinois, it’s highly recommended that rental property owners protect themselves and their investment with proper coverage. In some cases, property insurance may also be required by your homeowners insurance or mortgage provider.

Here are some of the unique insurance considerations for Illinois landlords:

  • Snowstorms and excessive winds: If you live in Illinois, you’re no stranger to winter storms, snow, and wind. When looking for Illinois landlord insurance, explore whether you’re covered for damages caused by freezing and thawing cycles. Natural wear and tear from snow damage, for example, may not be covered. In many cases, windstorm and hail coverage has a separate deductible — one that is higher but typically worth it given the state’s harsh winters.
  • Flood exposure: From city centers to the wetlands, flooding is prevalent in Illinois because of rain, snow, and hail from weather systems off the Great Lakes. Urban flooding is especially problematic in lower-income areas of the state. It’s important that landlords are prepared with flood coverage, and know whether or not their policy covers general water/sewer backup (included in many standard policies) or natural disaster flooding (usually as an add-on policy). For rural properties using septic tanks and closed systems, landlords are often responsible for proper maintenance and pumping. Stay on top of this task and know in advance if your policy covers sewer backup. With a partner like Azibo, natural disaster flood insurance is accessible across 51 jurisdictions and covers all types of flooding scenarios, including your basement (as many traditional flood insurance policies don’t cover below ground level).
  • Long-term roof damage: In Illinois, landlords need to pay attention to how weather conditions affect the safety and stability of their property. Over time, water damage and wind can wear down your roof. A leaky roof or mold caused by damp conditions, for example, is often not covered by a standard landlord insurance policy. 

Tips for lowering your Illinois landlord insurance premium

Your insurance premium depends on a number of factors, including geographic location, property condition, and claims history. You can also change your rates by adjusting your desired coverage and deductible. Here are a few tips to help you lower your Illinois property insurance premiums:

1. Consider a higher deductible

In Illinois, you have the option to adjust your standard deductible to lower your topline premium. For this reason, raising your deductible can be a strategic opportunity to lower your premium. That said, be sure you aren’t taking on too big of a deductible in the event that you need to make a large claim. 

2. Require renters insurance for tenants

Another way landlords can better protect themselves and lower premiums is by requiring renters insurance for tenants. While renters insurance is not required by law in Illinois, some landlords may require it on a case-by-case basis. This is an excellent way to set expectations early on, prepare renters for unexpected situations, and ensure your investment is protected. 

3. Mitigate risk with the appropriate safety features

The best way to prepare for risk and lower your premiums is with a thoughtful safety plan. Prioritizing safety measures means outfitting your property with smoke and carbon monoxide detectors, and installing security and fire alarm systems. It also means regularly conducting inspections to make sure tenants are following the lease terms, like not barbecuing on the roof or smoking in the unit. Some carriers may offer discounts for going the extra mile to prioritize safety. Even if they don’t, it’s a good idea to protect yourself and decrease liability by putting more precautions in place.

4. Relocate strategically if needed

As a rental property owner, you understand the unique pressures of renting your home to tenants — especially if you’re in a higher-risk area for crime or flooding, for example. If you’re considering relocation or are purchasing a property for the first time, opt for an inland property that’s farther away from the water but still in a desirable destination. By reducing your property’s risks, you can potentially save money on Illinois property insurance premiums. 

5. Be consistent and thorough about maintenance

In the historic buildings of Chicago as well as homes throughout the state, it’s very important to stay up to date with building and safety codes. It’s your responsibility to know the rules, do regular inspections, and maintain the property to avoid negative repercussions and property damage that could have been prevented. If you don’t live nearby, consider hiring a property manager to help you stay on top of maintenance. 

Additional Illinois landlord insurance coverages and policies to consider

With the unique risks that landlords in Illinois face, investing in additional coverage on top of your standard landlord insurance can help you and your investment stay protected. Here’s what additional coverages and policies you may consider:

  • Loss of rent coverage: While it’s optional, loss of rent coverage is highly recommended in a state like Illinois that has a higher risk of snow storms, flooding, and more. When a rental property is severely damaged by a natural disaster, accident, or tenant negligence, it becomes uninhabitable and unable to be rented out. Due to this forced vacancy, landlords can’t collect rent payments and will lose their rental income until the property is repaired. With rent loss coverage, the financial burden of a vacant rental property is less severe so long as the cause of the claim is covered by the policy.
  • Umbrella insurance: As with loss of rent coverage, landlords aren’t required to get umbrella insurance in Illinois — but it’s a great idea to have comprehensive liability coverage in this highly populated, litigious state. Umbrella insurance helps protect you and your assets in two scenarios: if your primary insurance policy (regular homeowners, landlord, auto, or watercraft policy coverage) doesn’t cover you for a specific scenario, or if you get caught up in an expensive lawsuit that exhausts the financial limits of your primary plan.
  • Theft and vandalism coverage: This insurance coverage doesn’t refer to damage by a tenant, but rather if someone breaks in and damages a window, spray paints the walls, or causes other structural damage. While this coverage is also optional, it may be a good idea if you live in a highly populated area that has a higher crime rate like Chicago. 

Partner with a specialized local insurance agent through Azibo

Navigating lengthy property insurance policies is difficult in any state — but especially one like Illinois. Committed to enhancing the landlord experience, Azibo is the only national online commercial insurance producer focused solely on independent landlords. 

Landlord insurance typically costs about 20% more than homeowners insurance. According to NerdWallet, the average cost of homeowners insurance in the U.S. is about $1,784 per year. This would mean the average landlord premium is approximately $2,141 per year. Yet many Azibo customers pay annual premiums under $1,000 for landlord coverage. We’re proud to provide you with quick access to a curated set of high-quality insurance carriers — so you get the right coverage, at the right price. 

Ready to put insurance headaches and hassles in the past? Azibo is here to help. Simplify the Illinois property insurance process and get your free quote today

Looking for more state-by-state insurance guides? Check out these resources: 

Guide to New York Landlord Insurance

Guide to California Landlord Insurance

Guide to Florida Landlord Insurance

Azibo Insurance Services LLC, a wholly owned subsidiary of Azibo Inc, is a licensed insurance producer. Contact us to discuss your specific insurance needs.

Disclaimer: The information provided in this post does not, and is not intended to, constitute insurance advice; instead, all information, content, and materials are for general informational purposes only. This content may not constitute the most up-to-date insurance information. Readers must contact a licensed insurance agent or company to obtain quotes, advice, and guidance with respect to any insurance matter. No reader, user, or browser of this article should act or refrain from acting on the basis of information herein without first seeking the advice of a licensed insurance producer.

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This article and the Azibo Blog in general is intended for informational and educational purposes only. It is not investment, tax, financial planning, legal, or real estate advice. Please consult your own experts for advice in these areas. Azibo provides information believed to be accurate, but Azibo makes no representations or warranties about the accuracy or completeness of the information contained on this article or blog.

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