Commercial Property Insurance

Note: This information was developed to provide consumers with general information and guidance about insurance coverages and laws. It is not intended to provide a formal, definitive description or interpretation of Department policy. For specific Department policy on any issue, regulated entities (insurance industry) and interested parties should contact the Department.

Actual Cash Value: Replacement cost less depreciation, considering the age and condition of your property.

Additional Living Expenses: Pays expenses over and above your normal living costs (motel rooms, restaurant meals, and laundry service) while your home is being repaired or rebuilt after damage from an insured loss.

Agent: A representative who sells insurance for one or more companies.

Application: A signed request for insurance, giving information about the prospective policyholder

Appraisal: An evaluation of your property.

Binder: A temporary or preliminary agreement, which provides coverage until a policy can be written or delivered.

Broker: A licensed person or organization you can pay to shop for insurance on your behalf.

Builders Risk: Coverage for a home under construction. Claim payments are based on the percentage completed at time of loss. This coverage must be changed to a homeowners policy upon completion of the building.

Cancellation: Termination of a policy before its normal expiration date.

Claim: Your request for the insurance company to pay you an amount under the terms of your policy.

Claims Adjuster: A person an insurance company hires to settle claims. The adjuster could either be a company employee or under contract with the company.

Coinsurance Clause: An agreement with the insurance company in which you agree to carry insurance on your property in an amount equal to a certain percentage of its actual cash value.

Covered Expenses: The losses or conditions the policy will pay for.

Deductible: The dollar amount you must pay out-of-pocket for each claim before the insurance company begins paying.

Depreciation: Decrease in home or property value due to age or wear and tear.

Earthquake Insurance: A type of catastrophic coverage available for an additional premium to repair or replace your property/personal belongings when damaged by an earthquake. Standard home insurance policies do not cover earthquake insurance.

Endorsement: Amendment to the policy used to add, change, or delete coverage. Also referred to as a "rider."

Exclusions: Specific situations or circumstances listed in your policy describing when benefits will not be paid. Typical homeowners insurance exclusions are earthquake, sewer backup/sump pump failure, ordinance or law, and intentional loss.

Floater: Additional coverage for personal property such as jewelry, artwork, or antiques not otherwise included in the homeowners policy, or included for a nominal coverage amount. The coverage "floats" or moves with the property. Also called "Scheduled Personal Property Endorsement."

Flood Insurance: A type of catastrophic coverage available for an additional premium to repair or replace your property/personal belongings when damaged by rising water. Standard home insurance policies do not cover flood insurance. If your property is located on a flood plain, your lender may require you to purchase flood insurance.

Full Replacement Policy: A homeowners policy that pays the full replacement cost (up to the policy maximum) to repair or restore damaged property.

Guaranteed Replacement Cost Coverage: Endorsement that lets you replace your home without subtracting for depreciation, even if it costs more than the policy limit. Most companies limit the guaranteed replacement cost to 125%.

HO Forms: Homeowners insurance polices are sometimes referred to by the kind of form used and the specific perils they cover. Examples are HO2, HO3, HO4, HO5, HO6, and HO8.

Home Inventory: A detailed list of personal possessions and any information (including pictures or videos) that could help identify lost or destroyed items.

Illinois FAIR (Fair Access to Insurance Requirements) Plan: A not-for-profit property insurance association that offers insurance to individuals who have been refused coverage by at least three insurance companies.

Illinois Insurance Guaranty Fund: A fund that pays an insurer's claims when the company is insolvent. All Illinois-licensed insurance companies belong to the Illinois Guaranty Fund.

Inflation Guard Endorsement: A special endorsement that increases the face amount of a homeowners policy on a regular basis to compensate for the increasing costs of home construction.

Inspection Report: A report filed by an individual employed by the insurance company or credit agency, giving general information on the physical condition of the property.

Insured: The policyholder or person(s) protected in case of a loss/claim.

Insurer: The insurance company.

Lapsed Policy: A policy that has terminated for non-payment of premiums.

Liability Coverage: Insurance protection that pays for claims or judgments brought against the insured.

Market Value: A real estate term for the current value of your home if you were to sell it. Market value includes the price of land, and is not generally used when settling insurance claims.

Mine Subsidence Insurance: Pays when an underground mine shifts, causing damage to your property. Insurance companies must offer mine subsidence insurance in counties where mines are under one percent or more of the land. Underground mines are common in central and southern Illinois, but other areas of the state may be affected as well. You must sign a rejection form to remove this coverage if you live in a county where mine subsidence insurance is required.

Non-Bound Application: There is no coverage involved and you pay no money. The insurance agent submits the application to the company to find out whether or not you will be accepted.

Non-renewal: A notice of the insurance company’s refusal to renew your policy prior to the end of the policy term.

Peril: Event causing damage to your property (for example: fire, tornado, theft, or vandalism).

Personal Property: Personal belongings such as furniture, appliances, clothes, jewelry, and bicycles.

Private Mortgage Insurance (PMI): Insurance that provides financial protection to your lender if you default on your mortgage payment. By purchasing PMI, a homebuyer may be able to obtain a mortgage with little or no down payment.

Policy: The contract form issued by the company to explain the coverage provided. It is a legal document.

Premium: The price charged for insurance.

Public Adjuster: A person you can hire to help settle a claim with an insurance company. A public adjuster may be hired to handle a complex or difficult loss negotiation. Generally, the public adjuster receives a percentage of the settlement reached. In Illinois, a public adjuster must be licensed with the Department of Insurance.

Real Property: Property considered to be immovable, such as land and things affixed to it.

Replacement Cost: A determination of the cost to replace contents, rebuild your home, or repair damages with materials of like kind and quality, without subtracting for depreciation.

Settlement: After negotiating, the amount you accept from the insurance company as full payment for your loss.

Sewer Back-up and Sump Pump Overflow Coverage: Coverage available for an additional premium to your homeowners insurance policy that pays for damage to your finished basement caused by water or waterborne material which backs up through a sewer, drain or overflow or is discharged from a sump pump overflow. Water seepage is not covered.

Title Insurance: Protection against any defect in the title to your property. Title insurance can be paid for by either the buyer or seller and is usually paid for when the home is purchased.

Umbrella Liability Insurance: A policy that "floats" above your other coverage. You must carry a certain amount of underlying liability coverage before you may buy an umbrella policy. This coverage kicks in if you are sued for an amount greater than the limits of your homeowners policy.

Watercraft Endorsement: Applies to small motorboats and sailboats and broadens your personal liability and medical payments coverage on them. If your watercraft exceeds a specified length, you will need a separate boat owners or yacht policy.

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: This information was developed to provide consumers with general information and guidance about insurance coverages and laws. It is not intended to provide a formal, definitive description or interpretation of Department policy. For specific Department policy on any issue, regulated entities (insurance industry) and interested parties should contact the Department. If your homeowner’s insurance company terminates your policy without your permission, your company has certain duties and you have certain rights. A company may terminate a policy without your permission in three ways:

• rescission - when the company voids your policy back to the beginning. There is no coverage at all and the company will return the money you paid;
• cancellation - when the company terminates your policy before the expiration date;
• nonrenewal - when the company terminates your policy at the expiration date.

A company’s duties and your rights differ depending on whether your policy is rescinded, canceled or nonrenewed. Furthermore, your rights and your insurer’s responsibilities depend upon the nature of the policy, as well as the length for which the policy has been in effect. This fact sheet explains what happens when your private homeowner’s insurance policy is being nonrenewed at its expiration date.

Is my policy a private homeowner’s policy?

A private homeowner’s policy is sometimes referred to as a “policy of fire and extended coverage insurance.” These policies cover real property that is used principally for residential purposes, usually including a building that houses up to 4 families. Typically, the policies also cover any household or personal property that is commonly used for daily life. If your policy is not for residential purposes, but rather covers a commercial building, the following information may not be applicable.

Why can my insurer nonrenew my policy?

A company may nonrenew your private homeowner’s policy for different reasons depending upon the duration that your policy has been in force. If your policy has been continuously active less than 5 years, please see Nonrenewal of Private Homeowner’s Insurance Policy Active for Less Than 5 Years.  If your policy has been continuously active for 5 or more years, please see the appropriate section below labeledNonrenewal of Private Homeowner’s Insurance Policy Active for 5 or More Years.

Nonrenewal of private homeowner’s insurance policy active for less than 5 years

Reason for nonrenewal

A company may nonrenew your homeowner’s policy for any reason except age or location of the property, or the age, gender, race, color, ancestry, marital status or occupation of the occupants.

If the company nonrenews your policy because the property condition has declined, the company must allow you time (not more than 90 days) to make required repairs.

A company is prohibited from nonrenewing your homewowner's policy based solely on credit report information. If credit information from your credit report is used to nonrenew your insurance policy, the insurer must provide you with the name of the national credit bureau that supplied the information so that you can get a free copy of your credit report. For more information about credit scoring, see our fact sheet entitled Understanding How Insurers Use Credit Information.

Effective January 1, 2003, an insurer is prohibited from nonrenewing your homeowner’s policy solely on the basis that one or more claims have been made against any policy during the preceding 60 months for a loss that is the result of a hate crime committed against the person or property insured if the insured provides evidence to the insurer that the act causing the loss is identified as a hate crime on a police report.

Notice

The company must send you a written notice explaining why it is nonrenewing your policy. The notice must clearly articulate the specific reason(s) for nonrenewal. The company may not simply state “fraud” or “misrepresentation,” but rather provide factual basis for such reason(s). The notice must also explain two important items:

1. You have the right to appeal the nonrenewal as explained below under Hearing Rights.
2. You may be eligible to buy insurance from the Illinois FAIR Plan Association if you cannot find coverage elsewhere.

Note: If your insurer merges or restructures with another company, or if your insurer reclassifies your policy (possibly due to an excess of claims), the company must mail you a notice about the change 60 days prior to a change in your policy.

Mailing time

The company must mail a nonrenewal notice to you at your last known mailing address, so it is important for you to notify your insurance agent or company if you move. The company must mail your nonrenewal notice:

• At least 30 days before the nonrenewal date if the policy has been in force less than 5 years

The company must keep proofthat it mailed your notice, but it does not have to show proof that you received it.

Hearing Rights

If you believe your company failed to follow the required steps when nonrenewing your policy, you may appeal the nonrenewal to the Director of Insurance. To do so, you must mail or deliver your written request for a hearing to the Department of Insurance at least 20 days before the expiration date, explaining in detail why you believe the company has improperly nonrenewed your policy.

If your hearing is granted, we will send you written notice about the time and date of the hearing.

Nonrenewal of Private Homeowner’s Insurance Policy Active for 5 or More Years

Reason for nonrenewal

A company may elect to not renew your homeowner’s policy for a limited set of reasons if it provides 30 days written notice, or for nearly any reason if it provides you with 60 days written notice (the limited reasons for 30 days notice are available below).  In either case, your insurer may not nonrenew your policy for reasons of age or location of the property, or the age, gender, race, color, ancestry, marital status or occupation of the occupants.  If the company nonrenews your policy because the property condition has declined, the company must allow you time (not more than 90 days) to make required repairs.

Furthermore, a company is prohibited from nonrenewing your homeowner's policy based solely on credit report information. If credit information from your credit report is used to nonrenew your insurance policy, the insurer must provide you with the name of the national credit bureau that supplied the information so that you can get a free copy of your credit report. For more information about credit scoring, see our fact sheet entitled Understanding How Insurers Use Credit Information.

Effective January 1, 2003, an insurer is prohibited from nonrenewing your homeowner’s policy solely on the basis that one or more claims have been made against any policy during the preceding 60 months for a loss that is the result of a hate crime committed against the person or property insured if the insured provides evidence to the insurer that the act causing the loss is identified as a hate crime on a police report.

30 days written notice

When the company has mailed written notice of nonrenewal of a policy that has been in effect 5 years or more only 30 days before the nonrenewal date, an insurer may only decide to nonrenew your policy for the following reasons:

1. The insured initially obtained the policy through giving misleading or incorrect information to the insurer; or
2. A significant change has occurred such that there is a measurably greater chance an unfortunate event will affect the property. 

For all other reasons, your company must mail you written notice 60 days in advance of nonrenewal.

Notice

The company must send you a written notice explaining why it is nonrenewing your policy. The notice must clearly articulate the specific reason(s) for nonrenewal. The company may not simply state “fraud” or “misrepresentation,” but rather provide factual basis for such reason(s). The notice must also explain two important items:

1. You have the right to appeal the nonrenewal as explained below under Hearing Rights.
2. You may be eligible to buy insurance from the Illinois FAIR Plan Association if you cannot find coverage elsewhere.

Note: If your insurer merges or restructures with another company, or if your insurer reclassifies your policy (possibly due to an excess of claims), the company must mail you a notice about the change 60 days prior to a change in your policy.

Mailing time

The company must mail a nonrenewal notice to you at your last known mailing address, so it is important for you to notify your insurance agent or company if you move. The company must mail your nonrenewal notice:

• At least 30 days before the nonrenewal date only if the reason for nonrenewal is one of the limited reasons above; or
• For almost any other reason, at least 60 days before the nonrenewal date.

The company must keep proof that it mailed your notice, but it does not have to show proof that you received it.

Hearing Rights

If you believe your company failed to follow the required steps when nonrenewing your policy, you may appeal the nonrenewal to the Director of Insurance. To do so, you must mail or deliver your written request for a hearing to the Department of Insurance at least 20 days before the expiration date, explaining in detail why you believe the company has improperly nonrenewed your policy.

If your hearing is granted, we will send you written notice about the time and date of the hearing.

Note: This information was developed to provide consumers with general information and guidance about insurance coverages and laws. It is not intended to provide a formal, definitive description or interpretation of Department policy. For specific Department policy on any issue, regulated entities (insurance industry) and interested parties should contact the Department.

Fires and natural disasters are unforeseen and unpredictable, and the recovery process can be overwhelming.  If your property or home was insured you will have to work through your company’s claims process, and you may be approached by an “insurance adjuster” who claims he or she can obtain a more favorable settlement from your insurance company.  You should always be suspicious of any individual offering a service or benefit that sounds or appears “too good to be true” and contact the Department before entering into a contract or formal agreement that raises questions or suspicion.

This fact sheet provides information about public adjusters and answers some frequently asked questions.

What is an adjuster?

There are three types of insurance adjusters:

• A “company adjuster" is an employee of your insurance company. They represent the interest of the insurance company and are paid by the insurance company. They will not charge you a fee.
• An “independent adjuster" is hired on a contract basis by your insurance company to represent the insurance company's interest in the settlement of your claim. They are paid by your insurance company. They will not charge you a fee.
• A “public adjuster" does not work for any insurance company, is not a public employee, and does not work on behalf of the State of Illinois, Department of Insurance, or any other public agency. They work for you to assist in the preparation, presentation and settlement of your claim. You hire a public adjuster by signing a contract agreeing to pay a fee or commission based on a percentage of your settlement, or other method of compensation.

Do I have to hire a public adjuster to deal with my insurance company?

No. Many consumer find that the services offered by public adjusters can be performed, for free, by trained insurance company staff.  You may wish to speak with Department staff before engaging the services of a public adjuster.

Your insurance company also has knowledgeable claim adjusters who are available to assist you with the claim process.

Is a public adjuster’s fee covered in my insurance policy?

No.  Insurance policies do not cover the fees of a public adjuster.

How does a public adjuster get paid?

You must pay for the services provided by a public adjuster.  Typically, public adjuster’s charge a fee equal to a certain percentage of the claim paid by your insurance company.  In other words, after your insurance company settles your insurance claim, the public adjuster could take a percentage of that settlement. 

Are public adjuster fees negotiable?

Yes.  All fees charged by the public adjuster can and should be negotiated.

Who will my insurance company work with after I hire a public adjuster?

Once you sign a contract with a public adjuster, the public adjuster will notify your insurance company, who will then send all correspondence to your public adjuster.  You should ask the public adjuster to routinely update you on the progress of your claim. The insurance proceeds will be sent to you and you must then give the adjuster the fee that you agreed to on the contract with him.

Do I have to sign a contract with a public adjuster?

Yes. Illinois law requires the public adjuster to provide you with a written contract which has been approved by the Director of Insurance.The contract should specify the services the public adjuster will provide for you and any salary, fee, commission, compensation or other consideration he or she will receive for those services. The contract you sign with the public adjuster is binding and can only be canceled by certified mail within 5 business days after the date the contract was signed.

Are there restrictions on when a public adjuster can solicit me?

Yes.  A public adjuster cannot solicit you while a “loss-producing occurrence,” such as a fire, is continuing or while the fire department or its representatives are engaged at your property.  A public adjuster is also prohibited from soliciting your business between the hours of 7:00 p.m. and 8:00 a.m.  If a public adjuster approaches you during these times you should report him or her to the Department. 

Are there standards of conduct that a public adjuster must follow?

Yes.  A public adjuster is required to serve with objectivity and complete loyalty for your interests alone and to render to you such information, counsel, and service as will best serve your insurance claim needs and interests.

Does a public adjuster have to be licensed?

Yes.  Illinois law requires public adjusters to be licensed with the Department of Insurance. Contact the Department at (866) 445-5364 to verify that the public adjuster is licensed and in good standing before signing any contract.

Where can I find more information?

Useful information on insurance coverage and how to handle the insurance claims process can be found in the Department’s consumer fact sheet entitled “When Disaster Strikes – What to do After an Insured Homeowners Loss.”  The fact sheet can be found on the Department’s website, insurance.illinois.gov, or by clicking here. 

Trained insurance professionals are also available to assist you for free at the Department of Insurance, which can be reached toll-free at (866) 445-5364.