If a fire destroyed your home, you'd think your homeowners insurance would cover the costs to get things back the way they were, right? Wrong. It depends on where you live. In Missouri there's a law, referred to as a value policy act, that mandates insurance companies pay you the full amount of your insurance policy, if your home is a total loss. News 4 Investigates discovered that insurance laws in Illinois are very different. Even if your home is a total loss, there's a chance you could only receive a fraction of the amount of your policy.
If your home in Illinois is destroyed by fire, the insurance company will depreciate the value of the house and contents and then offer to cut you a check for what it determines is the cash value of your property. That amount can be anywhere from 25-50% less than the amount of the policy. In the case of Terry Mickens, whose house burned down last summer, his insurance company offered a cash settlement of $12,000 despite the fact his policy was for $75,000. Only after you rebuild your home, do you get the remainder of the amount of your policy. Sounds simple, right? What if you just want to clear the lot, sell it and put the money down on a new home? What if you run into obstacles rebuilding the home? A less than perfect credit record could keep you from getting a loan to rebuild. If you live in a depressed neighborhood, you might not be able to get a loan during this recession. Remember, if you don't rebuild, you don't get the full amount of your policy. That money stays in the pocket of the insurance company. It would appear that the law's set up in a way that creates an incentive for insurance companies to put roadblocks in the way of homeowners so they can't rebuild.
All too often, homeowners find out about this giant loophole in Illinois insurance law, the hard way. If you think your insurance company has treated you unfairly, you can file a complaint with the Illinois Division of Insurance. You can also turn to an attorney or a licensed public adjuster, experts in homeowners insurance who can represent you in an arbitration process. If you think it's outrageous that Illinois laws don't provide more protection for homeowners who've lost everything in a fire, you can contact the legislators in your community and ask them to change the laws. Two who might be at the top of the list are Senator William Hane of Alton, who is chairperson of the Senate Insurance Committee and Rep. Ron Stephens, a member of the House Insurance Committee.