Landlord Insurance in Illinois: A Guide for Property Owners

A Guide for Property Owners

Illinois’ real estate market is booming, driven by affordability and numerous universities. However, landlords face challenges from harsh weather to aging properties (dating back to before the 1950s). Getting the right landlord insurance coverage in Illinois is the best way to ensure property protection and financial security.

In this guide, we will walk you through the costs, coverage, and tips for choosing the right landlord insurance in Illinois.

Key Takeaways and Pro tips:

  • While Landlord Insurance isn’t mandatory, it is often required by lenders and highly recommended.
  • In my experience as a Landlord, it’s best to get a landlord policy with a $5K deductible, but most importantly, make sure to have the right coverage based on local conditions (e.g., snow, wind, flooding).
  • Price: Landlord insurance in Illinois can vary depending on the property type, size, condition, location, and much more. Don’t just focus on price. Find an insurer with the best coverage and reputation.
  • I also recommend you speak to a knowledgeable insurance broker when selecting your coverage. We’ve hand-selected Obie as our ONLY national insurance partner because I personally use them and think they are the best fit for landlords. Click here to learn more.

Is Landlord Insurance in Illinois Mandatory?

Landlord insurance isn’t required in Illinois, but we recommend you get coverage. Most lenders will also require rental property owners to have some sort of coverage. This way, if something bad happens to the property, they can get their money back through the insurance carrier.

You might think homeowners insurance has you covered, but that’s not the case. Homeowners insurance policies usually only work if you live in the property (owner-occupied homes). If you’re renting the property out, you will need landlord insurance coverage for any potential property damage or legal costs.

In Illinois, landlord coverage needs can vary by location. Rental properties in bustling Chicago may need a different landlord policy than properties in a quiet Elmhurst neighborhood.

Landlord Insurance Illinois Coverage Options

There are several types of coverage options to consider. A standard policy will include basic rental property insurance coverage options, but some properties or locations may require additional levels of protection.

Essential Coverages:

  • Property Damage: Includes repairs or rebuilding costs for multifamily and single-family homes, apartments, and condos due to incidents like fire, hail, or windstorm.
  • Liability Protection: Covers legal costs if someone is injured on your property.
  • Loss of Income: Reimburses lost rental income during property repairs.

Additional Coverage Options:

  • Additional Structures: Coverage for detached structures like garages or sheds.
  • Personal Property: Protects maintenance tools stored on-site.
  • Vandalism and Burglary: Protection against vandalism and burglary incidents.
  • Flood Insurance: Essential if your property is in a flood-prone area.
  • Umbrella Insurance: Offers extended liability limits.
  • Building Renovation: Covers renovation-related costs.
  • Ordinance and Law: Assists in meeting current building code-related expenses.
  • Rent Guarantee Insurance: Compensates for lost rent if tenants fail to pay.

Types of Landlord Insurance in Illinois

In Illinois, there are three landlord policy options: DP-1, DP-2, and DP-3.

DP-1 Dwelling Fire Coverage (Basic)

Best for: Landlords seeking basic protection at a lower cost.

What it Covers: Protection against nine named perils, including fire and lightning, windstorms, hail storms, riots, smoke, aircraft, vehicles, and a volcanic eruption.

Claims: Only covers the actual cash value of your property, which means a lower payout.

Note: This policy lacks coverage for theft, vandalism, and water damage and generally does not include liability coverage.

DP-2 Replacement Cost Coverage (Standard)

Best for: Landlords looking for a balance between cost and coverage.

What it Covers: Extended coverage for 18 named perils, with a broader scope than DP-1.

Claims: Offers replacement cost coverage, ensuring a better payout than DP-1.

DP-3 Open Peril Coverage (Premium)

  • Best for: Landlords requiring comprehensive coverage and liability protection, usually for newer or well-maintained older homes.
  • What it Covers: Comprehensive landlord insurance policy for all perils except those explicitly excluded in the contract.
  • Claims: Covers the replacement cost of losses, including loss of rent coverage and liability insurance.

Note: This policy often has more restrictions and may only be available for properties that meet specific age and building requirements.

Step 7: 21-Day Security Deposit Return

California mandates the return of the tenant’s security deposit within 21 days after they vacate the property, along with an itemized statement if there are any deductions. Your ledger should help you manage this efficiently.

Important Illinois Rental Property Insurance Considerations for Landlords

Let’s explore some critical aspects for choosing a rental property insurance policy in the Prairie State.

Urban and Rural Flood Exposure

Urban flooding is particularly problematic in lower-income areas. It is crucial to understand if your policy covers common water/sewer backups and whether you need additional coverage for natural disaster-induced flooding.

Special Considerations for Rural Properties

You are responsible for the upkeep and maintenance of septic tanks and closed systems on rural properties. Verify your type of property insurance covers sewer backups, and always perform proactive maintenance to get ahead of any issues.

Protecting Your Property's Roof

Roof maintenance is an important consideration in Illinois, given the fluctuating weather conditions. In the long run, weather elements like water and wind can adversely affect your roof’s condition, leading to leaks or mold. Often, these are not covered by standard landlord insurance policies.

Snow and Winds

Living in Illinois means getting accustomed to severe winter conditions. When choosing an insurance policy, check if it covers damages caused by freezing and thawing cycles that frequently occur in the state.

How Much Does Illinois Rental Property Insurance Cost?

The average landlord insurance cost in Illinois is $88 per month or $1,056 annually. It is generally 15%-20% more expensive than homeowners insurance.

The cost of landlord insurance depends on:

  • Where your property is located
  • The age of your property
  • Your credit history
  • The size of the property
  • How much coverage you need
  • The weather risk factors
  • Previous liability claims
  • The type of coverage you need
  • If there any safety measures in place

5 Tips for Reducing Illinois Landlord Insurance Premiums

Here are a few ways to save some cash on your landlord insurance premiums. 

1. Ask Tenants to Have Renters Insurance

It’s a good idea to ask your tenants to get renters insurance. It’s not required by law, but it can help protect your investment if there’s an accident or damage.

2. Invest in Weather-Resistant Materials

Given Illinois’ climate, investing in weather-resistant materials like stronger shingles or metal roofs for your property could be beneficial and help lower the cost of insurance.

3. Choose a Bigger Deductible

In Illinois, you can go for a higher deductible. You might have to pay more when something goes wrong, but your regular payments will be less.

4. Keep Your Property Well-Maintained

Follow the rules, do regular check-ups, and keep everything up-to-date to avoid potential risks or issues down the line.

5. Upgrade the Property's Security

Consider installing modern security features like surveillance cameras and secure gates to reduce the average cost of insurance premiums.

Find Affordable Landlord Insurance in Illinois with Baselane

Owning a rental property doesn’t have to come with sleepless nights worrying about the unexpected. You can rest easy with the right landlord insurance coverage.

Baselane has partenred with Obie to bring you comprehensive rental property coverage at affordable rates that can reduce your annual premiums by up to 25%. Get a free quote in less than a minute, with zero commitment and no phone call required.

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Financial Technology, Real Estate Investing, and Property Management, Accounting and Tax, Finance
Saad started his career as a Certified Public Accountant (CPA) working for a top-tier accounting firm. He was responsible for helping audit alternative investment funds. He later worked at a hedge fund where he was responsible for preparing financial statements and implementing new technology. He also ran a successful private tax practice for five years.

After completing his MBA at Duke, Saad joined The Boston Consulting Group to do management consulting. At BCG his experience spanned several industries and growth projects across Pharma, Retail, and Technology companies. His passion for democratizing finances led him to Plaid, a fintech, where he worked with large Banks and Financial Institutions to make finances and money easier for all.
A Guide for Property Owners
Landlord Insurance in Illinois: A Guide for Property Owners

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