How Often Should a Condo Association Review its Insurance Coverage?


Chicago condo associations are required by state law to maintain several types of insurance. Section 12 of the Illinois Condominium Property Act (765 ILCS 605/12) explains state requirements, but individual associations may also have their own rules related to insurance. Always refer to your governing documents before embarking on an insurance review.

When Should the Condo Board Review Insurance Coverage?

While maintaining the requisite insurance coverage is a must, which company your association secures coverage through is a choice your board of directors can make.

It’s recommended that at least once a year, the condo board reviews your association’s insurance coverage. If your association has recently completed a major upgrade to your property, that’s also a good time to review coverage.

For some, an opportune time for the board to review the association’s insurance policies is during the annual budget planning process. Others choose to put an insurance review on the agenda for another time of year.

Regardless of when in the calendar year the board chooses to do it, annual insurance reviews help ensure that the association is retaining appropriate coverage levels for its needs while not overpaying.

What Insurance Does a Chicago Condo Association Need?

Illinois condo associations should hold the following types of insurance coverage:

●  Property and Liability Insurance – HOAs and condo associations should hold general liability and property insurance. General property insurance covers the buildings and property structures themselves. It doesn’t cover any individual owner’s personal contents and finishes within their units. Liability insurance covers things like injuries that take place in the common areas of the property. For example, if a visitor slips and falls near your pool and gets injured, liability insurance would protect you.

●  Fidelity Bond / Crime Insurance – If the condo association has six or more dwelling units, Illinois law requires the association to obtain a fidelity bond to protect the funds that are in custody or control of the association. That includes the association’s reserve funds.

●  D&O Coverage – D&O coverage is an insurance policy that protects the condo association’s directors (D) and officers (O). It adds a layer of liability protection for volunteer board members in the event of any claims being made against the association.

●  Workers’ Compensation Coverage – This type of coverage covers volunteer board members as well as any vendors or employees of the association. Talk to your insurance provider to discuss the specifics of your worker’s comp policy.

In addition to these insurance protections, Chicago condo associations could consider taking out an umbrella policy or other types of insurance depending on their property. For example, garage keeper’s coverage may be needed if the association allows non-members to park on their premises, or social host liability insurance could be required if they permit alcohol to be served in their public spaces.

As you prepare to review your association’s insurance coverage, it can be helpful to work with your association management company and insurance broker to discuss the essential coverage types and policies you need to protect your condo association.

For additional questions about condo management and insurance requirements in Chicago, please contact our team at First Community Management.