What to know about Condominium Association Insurance

HOA insurance and Insurance for Condo Associations

This past year,  My agency has received numerous requests to quote Condominium insurance as many carriers have stopped writing this risk or have set stricter underwriting guidelines.

I quantify the Condominium Association Risk into 2 categories:

1. These associations have been non-renewed by their insurance carrier because of         claims and/or non-compliance with recommendations.

 2. These associations have a renewal offer but at a much higher rate. It amazes me to learn that some of these associations have no insurance as they decided not to renew with their current carrier because of a huge increase in premium.  What the insured/board member/property manager must understand is when one decides to go

without insurance, it places the risk in a different underwriting arena.  Most carriers will refuse to offer a quote because they have no previous coverage. The few carriers that will offer a quote to an uninsured association will be at a higher price.

The landscape of insuring America has changed dramatically because of global warming and unpredictable weather causing a much higher premium.  My best advice to Condominium Associations to maintain competitive premiums and great coverage are to practice the following:

  1.  Carry a high property deductible such as $10,000 to $25,000 as smaller property claims can affect you as much as a Catastrophic claim.  Underwriters  frown on frequency more than catastrophic claims. Set up a separate insurance reserve fund for smaller claims.
  2.  Update the electrical, plumbing, HVAC, roof etc. to assure the best coverage with a preferred carrier.
  3.  Do not rent more than 50% of units as this increases the risk substantially
  4.  Renting to Section 8, student housing or assisted living increases this risk
  5. Newer roofs of 10 years or younger may qualify for the a very preferred carrier
  6. No charcoal grilling, no grills on balcony or terrace or stored in garage especially propane tanks
  7. Electrical-No fuses, Federal Pacific, Stab Lok, Zinsco, Square D circuit breakers
  8. By laws should states that any losses that occur within the unit are not covered by the master policy
  9. Regular upkeep of communal areas
  10. Proper lighting of the communal areas
  11. Great curb appeal

 A solid insurance programs provides peace and security for all owners of an Association; so if you are not content with your current insurance program…give us a call at 312-264-6055!

A Condominium Association is required to have the following insurance, per Section 12 of the Illinois
Condominium Property Act (765 ILCS 605/12):
(1) Property Insurance: The Association shall maintain Property Insurance (1) on the
common elements and the units, including the limited common elements and except as
otherwise determined by the board of managers, the bare walls, floors, and ceilings of the
unit, (ii) providing coverage for special form causes of loss, and (iii) providing coverage, at
the time the insurance is purchased and at each renewal date, in a total amount of not less
than the full insurable replacement cost of the insured property, less deductibles, but
including coverage sufficient to rebuild the insured property in compliance with building
code requirements subsequent to an insured loss, including: Coverage B, demolition costs;
and Coverage C, increased cost of construction coverage. The combined total of Coverage
B and Coverage C shall be no less than 10% of each insured building value, or $500,000,
whichever is less.
(2) General Liability Insurance: The Association shall maintain commercial general liability
insurance against claims and liabilities arising in connection with the ownership, existence,
use, or management of the property in a minimum amount of $1,000,000, or a greater
amount deemed sufficient in the judgment of the board, insuring the board, the association,
the management agent, and their respective employees and agents and all persons acting as
agents. The developer must be included as an additional insured in its capacity as a unit
owner, manager, board member, or officer. The unit owners must be included as additional
insured parties but only for claims and liabilities arising in connection with the ownership,
existence, use, or management of the common elements. The insurance must cover claims of
one or more insured parties against other insured parties.
Common Interest Community Association
A Common Interest Community Association should review its Association’s community instruments to
(3) Fidelity Bond (Crime Insurance): An association with six (6) or more dwelling
units must obtain and maintain a fidelity bond covering persons, including the
managing agent and its employees who control or disburse funds of the association,
for the maximum amount of coverage available to protect funds in the custody or
control of the association, plus the association reserve fund. The fidelity bond must
be in the full amount of association funds and reserves in the custody of the
association or the management company.
(4) Director and Officers Liability Insurance: The board of directors must obtain
directors and officers liability coverage at a level deemed reasonable by the board, if
not otherwise established by the declaration or bylaws. Directors and officer’s
liability coverage must extend to all contracts and other actions taken by the board in
their official capacity as directors and officers, but this coverage shall exclude actions
for which the directors are not entitled to indemnification under the General Not For
Profit Corporation Act of 1986 or the declaration and bylaws of the association. The
coverage shall include, but not be limited to, coverage of: defense of non-monetary
actions; defense of breach of contract; and defense of decisions related to the
placement or adequacy of insurance. The coverage shall include as an insured: past,
present, and future board members while acting in their capacity as members of the
board of directors; the managing agent; and employees of the board of directors and
the managing agent.

This publication is provided as a public service by the Illinois Department of Financial and Professional Regulation and is intended for the informational use
and convenience of interested persons; it should not be considered a substitute for the advice of legal counsel. Although the information is considered to be
reliable as of the time of its publication, no warranty, expressed or implied, is made regarding the accuracy, completeness, or legality of any information,
either isolated or in the aggregate. The information is provided “as is”. Changes may be periodically made to the information contained in this publication.
The content on this website is not intended to constitute legal advice. Therefore, if you need legal advice, we encourage you to consult an attorney of your

Call Cacciatore Insurance for a complimentary quote at 312-264-6055!  We will find the most affordable program for you.  Insuring Condominium Association since 1906!

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