I have written about the types of insurance your association should obtain — property insurance, general liability insurance, a fidelity bond, directors and officers insurance and, in some instances, workman’s compensation insurance. Sections 12 and 12.1 of the Illinois Condominium Property Act (“Act”) set forth the insurance requirements for all condominiums throughout the state.What that article did not state was that Sections 12 and 12.1 were ambiguous and failed to state the amenities which the association was required to insure. In certain instances, this led to gaps between the association’s and owner’s policies.

To resolve this problem, the legislature recently amended Section 12 and 12.1 of the Illinois Condominium Property Act. In doing so, the legislature made it clear as to what types of insurance the board is required to carry and what the board must obtain insurance for on behalf of the association.

The following are the types of insurance that the board must carry for the condominium association:

1. Property Insurance. The board must obtain property insurance on the common elements and the units, including the limited common elements, covering at least the bare walls, floors and ceilings of the unit. This insurance must be for not less than the full insurable replacement cost of the insured property, less deductibles, including coverage for municipal building code requirements at the time the insurance is purchased and at each renewal date. The municipal code requirements tend to substantially increase the reconstruction of a building. Associations that fail to obtain insurance to cover this can be left well short of the cost to reconstruct the building. This could lead to a large special assessment. This property insurance need not cover improvements and betterments to the units installed by the unit owners, but if the board decides to take on insurance to cover the improvements and betterments, any increased cost to the association may be assessed back to those unit owners who have constructed the improvements or betterments. Improvements or betterments are now defined in the Illinois Condominium Property Act as: “All decorating, fixtures, furnishings, including electrical fixtures, appliances, air conditioning and heating equipment, water heaters, or built-in cabinets installed by unit owners.”

2. General Liability Insurance. All condominium associations must have general liability insurance against claims and liabilities in a minimum amount of $1 million or a greater amount to be determined by the board. This insurance must insure the board, the association, the management agent and their respective employees. Until this amendment to the Act, there was no minimum amount that the association had to carry.

3. Fidelity Bond. An association with six or more dwelling units must now maintain a fidelity bond covering all persons who control or disburse funds on behalf of the association. The bond must be for the maximum amount of coverage available to protect funds in the custody or control of the association, plus the association’s reserve fund.

4. Director’s and Officer’s Insurance. Board of directors must obtain director’s and officer’s liability coverage at an amount deemed reasonable by the board of directors, if the amount is not already set forth in the declaration or by-laws.

5. Other Insurance. The declaration may also require the board to carry the following insurance: (a) workman’s compensation; (b) employment practices; (c) environmental hazard; and (d) equipment breakdown insurance. If the declaration does not specifically require such insurance, then the board may obtain such insurance on behalf of the association if it believes it to be in the best interest of the association.

6. Owner’s Insurance. Prior to the date of the amendment to the Act, owners by law were not required to carry their own insurance. The Act still does not require this. However, it provides that the board of directors may adopt rules that require owners to obtain insurance covering their personal liability and compensatory damages to another unit caused by the negligence of the owner or his or her guests, residents or invitees, regardless of any negligence originating from the unit. If the board mandates such a policy and the owner fails to provide the board with proof of insurance, then the board may, but is not required to, purchase insurance on behalf of the unit owner and charge the cost back to the unit owner. The board cannot be held liable for any damage that may result from the board’s decision not to purchase insurance for the owner.

This is a substantial change to the Act. It clearly delineates the need for and the types of insurance that an association must have. With this new change, we recommend that all associations review their insurance policies to make certain the association is in compliance. In doing so, it is wise to discuss the matter with your individual insurance agent.



Since 1983, KSN has been a legal resource for condominium, homeowner, and townhome associations. Additionally, we represent clients in real estate transactions, collectionslandlord/tenant issues, and property tax appeals. We represent thousands of clients and community associations throughout the US with offices in several states including Florida, Illinois, Indiana, and Wisconsin.

If our law firm can be of assistance, please call 855-537-0500 or visit www.ksnlaw.com.


This article is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By reading this article you understand that there is no attorney client relationship between you and the article author. This article should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. © 2023 Kovitz Shifrin Nesbit, A Professional Corporation.